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I AGREE
22 Dec 2006
Moody's assigns definitive ratings to CMBS issuance of German Ground Lease Finance II S.A.
EUR 117.5 Million of Asset Backed Securities Rated.
Frankfurt, December 22, 2006 -- Moody's Investors Service has assigned definitive ratings to the CMBS
issuance (the "Notes") of German Ground Lease Finance II S.A.:
Aaa to the EUR 76,400,000 Class A1 Secured Instruments due
2017;
Aa3 to the EUR 41,100,000 Class B1 Secured Instruments due
2017.
Moody's previously assigned provisional ratings on 20 December 2006 to
the Notes.
The transaction centers around five real estate funding notes ("REF Notes")
issued by several limited partnerships incorporated in Germany (the "REF
Notes Issuers") and sold to the Issuer, which are secured by ground
rent payments arising from hereditary building rights on 10,934
units. In terms of ground rent payments, 86.5%
result from residential properties and 13.5% from commercial
properties. The hereditary building rights are held by institutional
investors (94.7%) and private individuals (5.3%).
The residential units underlying the cash flow generating hereditary building
rights are predominately located in North Rhine Westphalia and Saxony-Anhalt.
The ground rent payable in relation to these hereditary building rights
is subject to a three-annual inflation adjustment based on the
German CPI-index. In order to (i) convert unknown future
inflation adjustments in relation to the ground rents into pre-determined
cash flows and (ii) hedge periodical cash flows against unknown interest
rate development in the future, the Issuer enters into long-dated
inflation and interest rate swap contract which mature after the legal
final maturity date of the Notes. As such, the swaps aim
to provide a hedge for the property value against adverse inflation and
interest rate developments in order to facilitate the refinancing of the
REF Notes and the Notes. However, the hedging might potentially
result in negative mark-to-market exposure for the Issuer
upon termination of the swaps. The REF Notes are secured by,
inter alia, land charges on the properties, pledges of bank
accounts and share pledges. The final maturity date of the REF
Notes is in 2017, compared to a legal final maturity of the rated
Notes in 2020. The REF Notes benefit from a cash sweep of all excess
cash not needed to pay interest, potential step up margin amounts
after the expected maturity date of the REF Notes in 2014, senior
expenses and payments under the inflation and interest rate swap.
The REF Notes Issuers are limited partnerships incorporated in Germany
and are obliged to only conduct the business of owning and managing the
properties and related activities and neither of them has an employees.
The rating on the Notes is based upon: (i) Moody's assessment of
cash flow diversity and stability of ground rent payments backing the
Notes, hereby taking into account certain concentration arising
from institutional investors being the hereditary building
right holders; (ii) the loan-to-value and the interest
service coverage over the term of the REF Notes; (iii) an analysis
of the inflation swap provided by Bayerische Hypo- und Vereinsbank
AG (A2, P-1) incorporated into the structure; (iv) an
analysis of the interest rate swap provided by Bayerische Hypo-
und Vereinsbank AG (A2, P-1) incorporated into the structure;
(v) the security backing the REF Notes and the Notes; (vi) the quality
of the sponsor and property manager, Vivacon AG; (vii) the
expected availability of a committed liquidity facility to cover shortfalls
of interest, senior costs and payments under the swap structure;
(viii) the repayment structure; (ix) an analysis of the REF Notes
Issuers' corporate structures and (x) the legal and structural features
of the issue.
The definitive ratings address the expected loss posed to investors by
the legal final maturity of the Notes. In Moody's opinion,
the structure allows for timely payment of interest and ultimate payment
of principal at par on or before the rated final legal maturity date.
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 New Issue Report in respect of this transaction may be obtained
in due course by contacting Moody's client service desk in London at +44
(0) 20 7772-5454 or by way of Moody's public website, www.moodys.com.
London
Daniel Kolter
Managing Director
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Frankfurt
Christian Aufsatz
Vice President - Senior Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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