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Rating Action:

Moody's assigns A1 Counterparty Instrument Rating to the Liquidity Facility Agreement of the CMBS transaction Opera Finance (Unit-Invest) B.V.

Global Credit Research - 10 Dec 2010

London, 10 December 2010 -- Moody's Investors Service has assigned the following Counterparty Instrument Rating:

....Liquidity Facility Agreement dated 12 May 2005 relating to Opera Finance (Unit-Invest) B.V. ("Liquidity Facility"), Assigned A1

Counterparty Instrument Ratings measure the risk posed to a counterparty on an expected loss basis arising from the special purpose vehicle's (SPV's) inability to honour its obligations under the referenced financial contract by the maturity date of the contract.

For the purpose of the above rating, the SPV is Opera Finance (Uni-Invest) B.V., the financial contract is the above mentioned liquidity facility agreement and the maturity date of the contract is the legal final maturity date as defined in the Terms and Conditions of the Notes (February 2012).

Moody's rating does not address potential Liquidity Subordinated Amounts payable (as defined in the Master Definitions Schedule) and does not address the probability of payment of such additional amounts or any related payments to the liquidity facility provider.

RATINGS RATIONALE

The assigned Counterparty Instrument Rating measures the risk posed to the Liquidity Facility provider on an expected loss basis. Given the contingent nature of the Liquidity Facility, the expected loss in this case is calculated based (i) on the probability of a Liquidity Facility draw and (ii) the severity posed to the Liquidity Facility provider in scenarios in which the Liquidity Facility is not fully repaid. For a more detailed description please see below in Rating methodology.

The probability of a draw is driven by two factors: (i) the performance of the tenants of the property portfolio, i.e. the ability of tenants to pay the full rental payments to be allocated to the rent account; and (ii) the ability of the borrower to repay or refinance the remaining loan balance prior to legal final maturity of the Notes. At previous IPDs some partial repayments were received as result of property disposals. Therefore, in Moody's view, the probability of a draw is to some extent driven by the performance of the tenants as well as the borrower's solvency and ability to sell (part of) the portfolio and repay the loan. This means that a deterioration of the property portfolio/ borrower performance could have a negative impact on the Counterparty Instrument Rating assigned.

Should the underlying loan default during its remaining term (of the standstill agreement), received rental payments or an enforcement and sale of the underlying portfolio (at potentially distressed prices) are the envisaged strategy to repay potential liquidity draws. The loss severity posed to the liquidity facility provider is driven by the expected recovery proceeds from the portfolio. The loss severity is derived by simulating the value of the properties that secure the loan in order to determine the recovery value, taking into account accrued interest on the liquidity facility draws over the foreclosure time and costs related to foreclosure. Given the nature of the simulation, the recovery rate for each property is assumed to vary over time, reflecting the uncertainty related to property values when a default occurs and the location and quality of the properties. Within the portfolio, the value of properties in the same region and/or of the same property type is assumed to be correlated.

The interest payable on drawn amounts is based on a variable interest rate of 12-month LIBOR and a margin. The total outstanding Liquidity Facility amount at the legal final maturity date depends on the interest rate over the term of the transaction, which drives the total of accrued interest on the outstanding amounts by the Final Maturity Date. To consider the interest rate risk, Moody's used stressed interest rates for its accrual calculations.

UNDERLYING TRANSACTION

Opera Finance (Uni-Invest) B.V. is a true sale single loan transaction that closed in May 2005. The securitised loan is the senior portion of a senior/junior loan (together the "Whole Loan") structure secured by first-ranking security over initially 321 commercial properties (the "Properties") all located in The Netherlands. By November 2010, 103 properties had been disposed of. The current senior loan balance is EUR661.8 million and the junior loan balance is EUR138.9 million. The predominant property types are office (73% by market value) and industrial (27%).

At loan maturity in February 2010, the the Whole Loan failed to repay and parties signed a standstill agreement. In the standstill agreement a loan event of default was waived subject to certain conditions, including but not limited to certain senior loan targets. The legal final maturity date of the Notes is in February 2012. Since closing, the transaction has benefited from stable property cash flows and good coverage ratios mainly as a result of reduced interest payments stemming from a partial interest rate hedge (approximately 54% of senior loan) and current low interest rates.

Moody's stated in its latest press release dated 16 March 2010 that based on Moody's market value, the weighted-average senior loan LTV ratio is approximately 88% compared to the reported U/W LTV of 76% (as reported by Servicer in February 2010). Moody's Whole Loan LTV is 106% (based on 230 properties).

Regarding the underlying transaction, the key drivers of the current rating of the Class A Notes are (i) the execution of the borrower's disposal plan; (ii) the refinancing of the remaining balance of the senior/junior loan no later than three months prior to legal final maturity of the Notes; (iii) the expected pro-rata allocation of the majority of disposal proceeds across all classes of Notes as a result of the standstill agreement; and (iv) the limited time remaining for execution of the disposal plan in light of the legal final maturity of the Notes in February 2012 and a potential event of default under the Notes.

LIQUIDITY FACILITY AGREEMENT

Lloyds TSB Bank PLC has on the closing date committed under the above mentioned Liquidity Facility Agreement to provide a liquidity facility of EUR63 million to the Issuer. Under this Liquidity Facility, the Issuer is entitled to draw amounts up to the Liquidity Facility commitment to cover an "issuer income deficiency" (on any interest payment date, the available cash standing to the credit of the issuer general account being insufficient to make the payments with respect to senior costs and interest due on the Notes) and or "hedging loan" (i.e. shortfall in the amount of any periodic amount payable under the senior hedging arrangement).

It is a committed revolving facility for a period of 364 days and the maturity date is the date 364 days after the date of the Liquidity Facility agreement and if extended the earlier of (i) the date falling 364 days after the date of such renewal and (ii) the legal final maturity date in respect of the Notes (February 2012).

At the end of the 364-day period, the Issuer can request the Liquidity Facility provider to enter into a new committed revolving facility on the same terms, subject to no event of default under the Liquidity Facility being outstanding. If the Liquidity Facility provider declines the renewal, the Issuer may find an alternative liquidity facility provider or request a stand-by drawing of the undrawn liquidity facility amount which is deposited in a cash account and can be drawn under the same conditions as the Liquidity Facility.

For undrawn amounts the Issuer has to pay a commitment fee and the interest for drawn amounts is based on 12-month LIBOR plus a margin. Drawn amounts under the liquidity facility have to be repaid on the next interest payment date if sufficient funds are available, otherwise the amounts can be re-drawn. The last repayment date of the Liquidity Facility agreement is the legal final maturity date of the Notes. In line with property disposals until November 2010, the commitment reduced to EUR41.3 million representing 6.2% of securitised balance (similar to closing).

TRANSACTION FEATURES RELEVANT FOR THE LIQUIDITY FACILITY

In the priority of payments of the Opera Finance (Uni-Invest) B.V. transaction, amounts due to the Liquidity Facility provider rank junior to standard senior costs via the payment waterfall in the intercreditor agreement. The Liquidity Facility ranks senior to interest and principal payments on the Notes, i.e. available cash flows are first used to repay the liquidity facility before interest and principal on the Notes are paid.

RATING METHODOLOGY

A Counterparty Instrument Rating is assigned by evaluating factors determined to be applicable to the credit profile of the financial contract, such as i) the nature, sufficiency, and quality of historical performance information regarding the asset class of the underlying transaction as well as for the transaction sponsor, ii) an analysis of the allocation of collateral cash flows to the liquidity facility provider according to the priority of payments, iii) an analysis of the transaction's governance and legal structure, and iv) a comparison of these attributes against those of other similar transactions.

The following is a description of the rating methodology applied to assign this Counterparty Instrument Rating:

1) Type of liquidity facilities to which this methodology applies

The rating methodology used to rate this financial instrument is intended to rate instruments designed to provide liquidity to structured finance transactions (Liquidity Instruments, "LI"), where the probability of draw is driven by asset performance, by opposition to liquidity instruments in ABCP programmes, in which the probability of draw is also driven by market conditions. Typically, such instruments support the timely payment of interest of notes, and can also help such notes to amortise according to a specific amortisation profile.

The actual repayment of drawn amounts also depends on how assets are performing: this clearly makes a difference with liquidity lines used to advance payments from a guaranteeing institution, where the rating of the liquidity instrument would be mainly driven by the credit quality of such institution. The repayment of drawn amounts will occupy a certain position in the transaction priority of payments, typically senior to the specific item the LI is protecting.

2) Expected loss calculation

Following the approach used by Moody's to rate term notes, a loss under the LI is calculated for each asset's default scenario; by weighting each default scenario's severity result on the LI with its probability of occurrence, the expected loss level for the LI is determined.

Asset performance will determine when the LI needs to be drawn, as well as the amount of such draw. The repayment of drawn amounts will be made through the transaction's priority of payments and, although, from a structural point of view, a senior position to the protected item looks the most logical one, more subordinated positions could also be used. Obviously, the rating of the LI would be lower the more subordinated is the LI's repayment in the priority of payments.

For each default scenario, the loss under the LI is determined by calculating the net present value of repaid amounts (both of interest and principal), where the discount rate used is equal to the interest rate accrued by drawn amounts, and comparing such amount with the amount initially available under the LI. For those payment dates on which there is a reduction in the amount available under the LI, such reduction would be deemed as a "repaid amount", occurring according to the priority of payments. Finally, for those default scenarios under which the whole amount of the LI is not used, Moody's will assume that unused amounts are repaid as soon as the LI can no longer be drawn, again according to the priority of payments.

The expected loss calculation includes besides amounts drawn under the LI and accrued interest on the drawn amounts also unpaid commitment fee but not Liquidity Subordinated Amounts.

3) Probability of default

The rating of the LI is driven not only by the expected loss, but also by the probability of default: the size of unused amounts will not impact the likelihood that a loss (even minimum) arises under the LI. Such probability of default would address the ultimate payment of drawn amounts and the associated interest accrued, but would not take into consideration the timely payment of interest or principal.

4) Expected average life calculation

The method used to calculate the expected average life for the LI follows the same logic as that explained above to calculate the expected loss: an average life for the LI is calculated for each asset's default scenario, which is weighted by the probability of occurrence of such scenario.

The principal methodologies used to rate the underlying transaction were Update on Moody's Real Estate Analysis for CMBS Transaction in EMEA published in June 2005 and Moody's Updates on its Surveillance Approach for EMEA CMBS published in March 2009.

REGULATORY DISCLOSURES

The rating has been disclosed to the rated entity or its designated agents and issued with no amendment resulting from that disclosure.

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

This rating is published. Any change in the rating will be publicly disseminated by Moody's through normal print and electronic media, and in response to requests to the Moody's rating desk, in accordance with Moody's standard practice at the time.

Moody's will monitor this rating. All monitoring information, details of any material changes to the information already supplied to us and notification of any amendments to the documentation that we have reviewed should be sent to monitor.cmbs@moodys.com.

Moody's ratings address only the credit risks associated with the transaction; other non-credit risks have not been addressed, but may have significant effect on yield to investors. Moody's ratings are subject to revision, suspension or withdrawal at any time at our absolute discretion. The ratings are expressions of opinion and not recommendations to purchase, sell or hold securities.

Please visit Moody's website at www.moodys.com or contact our Client Service Desk in London (+44-20-7772 5454) to obtain further information regarding this transaction. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the three years preceding the Credit Rating Action. Please see the ratings disclosure page www.moodys.com/disclosures on our website for further information.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

London
Jeroen Heijdeman
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Christophe de Noaillat
Senior Vice President
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's Investors Service Ltd.
One Canada Square
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JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's assigns A1 Counterparty Instrument Rating to the Liquidity Facility Agreement of the CMBS transaction Opera Finance (Unit-Invest) B.V.
No Related Data.
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