The Class A Notes were redeemed in full
London, 27 January 2011 -- Moody's Investors Service has today withdrawn its rating on the Class
A Notes issued by Talisman-3 Finance p.l.c.
due to early redemption in full on 24 January 2011 (amount reflects initial
outstandings):
EUR560M A Notes, Withdrawn (sf); previously on Jun 7,
2006 Definitive Rating Assigned Aaa (sf)
The Class B Notes which were partially redeemed and the Class X and Class
C Notes are currently rated Aaa (sf) by Moody's. The Class
D, E and F Notes are not rated by Moody's.
The Note redemptions resulted from the repayment of the Trier Loan on
its extended maturity date and the prepayment of the Bastion Loan.
RATINGS RATIONALE
The key parameters in Moody's analysis are the default probability
of the securitised loans (both during the term and at maturity) as well
as Moody's value assessment for the properties securing these loans.
Moody's derives from these parameters a loss expectation for the
securitised pool. Based on Moody's revised assessment of
these parameters, the loss expectation for the remaining pool,
which now only consists of three loans has increased moderately since
the last review in June 2010. However, this is mitigated
for the Class B and C Notes by the good credit enhancement levels,
low note-to-value levels, and sequential payment allocation
of all further principal receipts.
Moody's increased loss expectation is due to the increased refinancing
default risk assessment for the remaining loans in the pool. The
re-assessment is driven by the continuing constrained availability
of financing for non-prime properties and the uncertainty with
respect to the path and timing for a recovery of the European lending
market.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. If warranted,
Moody's may change these expectations. Performance that falls
outside an acceptable range of the key parameters may indicate that the
collateral's credit quality is stronger or weaker than Moody's had
anticipated during its previous review. Even so, deviation
from the expected range will not necessarily result in a rating action.
There may be mitigating or offsetting factors to an improvement or decline
in collateral performance, such as increased subordination levels
due to amortization and loan re-/pre-payments or a decline
in subordination due to realised losses.
Primary sources of assumption uncertainty are the current stressed macro-economic
environment and continued weakness in the occupational and lending markets.
Moody's anticipates: (i) delayed recovery in the lending market
persisting through 2012, while remaining subject to strict underwriting
criteria and heavily dependent on the underlying property quality;
(ii) values will overall stabilise but with a strong differentiation between
prime and secondary properties; and (iii) occupational markets will
remain under pressure in the short term and will only slowly recover in
the medium term in line with the anticipated economic recovery.
Overall, Moody's central global scenario remains 'hooked-shaped'
for 2011. Moody's expects sluggish recovery in most of the
world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
MOODY'S PORTFOLIO ANALYSIS
Talisman-3 Finance p.l.c. closed in June 2006
and represents the securitisation of initially 13 commercial mortgage
loans originated by ABN AMRO BANK N.V., London Branch
that were secured by mainly first ranking mortgages on 88 commercial and
multi-family properties located across Germany and France.
The Berlin Loan and the Dresden Loan are cross defaulted but not cross-collateralised.
The properties of the portfolio were predominantly office (57.4%)
with the remaining collateral pool consisting of retail (28.8%),
multi-family (3.7%), mixed-use (4.7%)
and other (5.4%). 69% of the properties were
located in Germany and 31% in France.
Since closing, ten of the initial 13 loans have pre-paid,
representing 86.4% of the original pool balance.
Prepayments were allocated to the Notes on a 50% sequential and
50% pro rata basis until the principal amount outstanding of the
Notes reduced to a threshold of 50% of the principal amount outstanding
at the closing date. Subsequent to the 50% threshold being
reached, the transaction switched to sequential payment allocation.
The Trier Loan (7% of the pool as of October 2010) secured by a
retail property in Trier, repaid on its extended maturity date in
January 2011. This loan failed to repay on its initial maturity
date in October 2010. Also on the January 2011 interest payment
date, the Bastion Loan (20.4% of the pool) prepaid.
The loan's maturity date was in July 2012 and it was secured by 13 retail
box properties let to Edeka with a weighted average (WA) remaining lease
term of 9.7 years. As of October 2010, the Trier Loan
had an U/W LTV of 72.5% based on a July 2010 valuation while
the Bastion Loan's LTV was 76.1% based on a September 2009
valuation.
Following the loan repayments, three loans remain which are secured
by 12 properties in Germany: the cross defaulted Berlin and Dresden
Loans which represent 71% of the current pool balance and the Waterloo
Loan with the other 29% of the pool balance. None of the
remaining loans have additional debt in the form of B-loans.
The Berlin and Dresden Loans defaulted on their original maturity date
in January 2010 and were transferred into special servicing. The
two loans were subsequently restructured and among others, the maturity
date was extended until January 2012. These loans are secured by
two office properties (in Berlin and Dresden) with a government-linked
insurance/compensation provider as the main tenant (91% of the
rental income). The WA remaining lease term for the two properties
is 12.5 years and the loans have a combined interest coverage ratio
of 2.65x. Based on the latest valuation for the properties
as of October 2009, the current U/W LTV is 142%. While
there has been some improvement in the German office property market,
Moody's does not expect these loans' LTV to move back to a
re-financeable level by the extended maturity date. Moody's
has given benefit to the expected amortisation until the new maturity
date and some uplift in the property value with the result that Moody's
LTV at loan maturity for the two loans combined is 125%.
However, at this level Moody's expects the two loans to default
at their extended maturity date as well.
The Waterloo Loan, which will mature in January 2013, is secured
by ten residential properties located in Munster and Mannheim.
The portfolio was re-valued as of December 2009. Compared
to the last valuation as of December 2005, the value has decreased
by 1.2%. Following Moody's reassessment of
the properties, the Moody's LTV for this loan is 80%,
versus the U/W LTV of 75%. Moody's has assumed an
increased refinancing default risk for the loan compared to the assessment
in June 2010.
Portfolio Loss Exposure: Moody's expects a very high amount of losses
on the securitised portfolio, stemming mainly from the Berlin and
Dresden Loans. Given the default risk profile and the anticipated
work-out strategy for defaulted and potentially defaulting loans,
these expected losses are likely to crystallise only towards the end of
the transaction term. However, due to the repayments and
prepayments since the closing of the transaction and their mostly sequential
allocation, the credit enhancement available for the Class B and
C Notes has increased significantly. The current subordination
levels of 82.7% for the Class B and 61.7%
for the Class C provide protection against these expected losses.
RATING METHODOLOGY
The principal methodologies used in this rating were "Update on Moody's
Real Estate Analysis for CMBS Transactions in EMEA" published in June
2005, and "Moody's Updates on its Surveillance Approach for EMEA
CMBS" published in March 2009.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or financial
instruments in this transaction and the due diligence reports had a neutral
impact on the rating.
The updated assessment is a result of Moody's on-going surveillance
of commercial mortgage backed securities (CMBS) transactions. Moody's
prior review is summarised in a Press Release dated 4 June 2010.
The last Performance Overview for this transaction was published on 9
December 2010. 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.
For updated monitoring information, please contact [email protected]
To obtain a copy of Moody's Pre-Sale Report on this transaction,
please visit Moody's website at www.moodys.com or contact
our Client Service Desk in London (+44-20-7772 5454).
REGULATORY DISCLOSURES
The rating has been disclosed to the rated entity or its designated agents
and issued with amendment resulting from that disclosure. Following
Moody's disclosure of its initial press release to the transaction servicer,
Moody's was made aware that substantial changes to the portfolio would
happen within the following days. Subsequently, after the
announcement that two of the loans repaid, Moody's revised its assessment
of the transaction which resulted in no rating change on the Moody's rated
classes.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not 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 maintaining
a credit rating.
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
Viola Karoly
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Frankfurt am Main
Oliver Moldenhauer
Vice President - Senior Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
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Moody's comments on the performance of Talisman-3 Finance p.l.c. following the repayment of two loans
