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Rating Action:

Moody's downgrades Class A and Class B CMBS Notes issued by Juno (Eclipse 2007-2) LTD

Global Credit Research - 16 Feb 2011

Frankfurt am Main, February 16, 2011 -- Moody's Investors Service has today downgraded the Class A Notes and Class B Notes issued by Juno (Eclipse 2007-2) LTD (amount reflects initial outstandings):

....EUR677.25M Class A Notes, Downgraded to B1 (sf); previously on Oct 6, 2009 Downgraded to Baa3 (sf)

....EUR69.15M Class B Notes, Downgraded to Caa3 (sf); previously on Oct 6, 2009 Downgraded to B3 (sf)

At the same time, Moody's affirmed the Aaa (sf) rating of the Class X Notes. Moody's does not rate the Class C, Class D and Class E Notes issued by Juno (Eclipse 2007-2) LTD. Today's action takes into account Moody's updated central scenarios as described in Moody's Special Report "EMEA CMBS: 2011 Central Scenarios."

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 those parameters a loss expectation for the securitised pool. Based on Moody's revised assessment, the loss expectation for the pool has increased since the last review in October 2009.

The rating downgrade of the Class A and Class B Notes is due to a deterioration in pool performance as reflected by cash flow issues faced by several borrowers. Five loans totaling 63% of the current pool balance is currently in special servicing, of which three loans (19.8%) have shown a payment default as per the last Note IPD in November 2010. Additionally, Moody's has increased its refinancing default risk expectation and loss assessment for the loans given the high proportion of loan maturities in 2011 (45% of the current pool balance). Moody's considered in its re-assessment of the refinancing risk (i) the continuing upward yield pressure for non-prime properties (ii) the subdued lending market, especially for non-prime properties, and (iii) a slower than previously expected recovery of the lending market.

Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, 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 current 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- prepayments or a decline in subordination due to realized 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

As of the November 2010 Note IPD, the transaction's total pool balance is EUR 769.7m million down by 11% since closing due to repayments and prepayments. 15 out of the originally 17 loans are remaining. Based on the underwriter's ("U/W") market value as of November 2010, 35% of the properties are located in Germany, 26% in Sweden, 23% in Italy and 16% in France and Belgium. The property types by U/W market values are retail (43.5%), office (26.4%), logistics (16.5%) and residential (13.6%).

The largest loan is the Keops Portfolio loan (28.5% of the current pool). The loan is secured by a mixed office/industrial portfolio located across Sweden. The loan has been in special servicing since November 2009 due to the LTV default covenant breach. The current U/W whole loan LTV is 102%. A standstill agreement is in place with the borrower until end of February 2011 in order to allow for the preparation of a disposal strategy. The special servicer is investigating alternative strategies including enforcement. The loan maturity is in October 2011. Moody's is expecting high losses for this loan given Moody's whole loan LTV of 129%.

The second largest loan (Neumarkt, 15.9%) had a payment default at the November 2010 Note IPD. The loan is secured by a shopping centre in Cologne and it has been in special servicing since July 2009 as a result of cash flow deteriorations. The vacancy rate has increased from 7% at closing to currently 13%. About 28% of the current rental income is subject to lease expiry in 2013. Consequently, Moody's has adjusted its sustainable cash flow expectations to derive a value which results in an expected Moody's LTV at loan maturity in August 2013 of 143%. This compares to the UW LTV of 111% which is based on a November 2009 valuation. Moody's expects high losses for this loan.

The SCI Clichy Loan (14.6%) is secured by one office property close to Paris. The loan has been in special servicing since August 2009. The vacancy rate has increased to 38% from fully let at closing. Debt service is currently topped-up by a reserve. Moody's LTV at loan maturity in November 2011 is 165%. Moody's expects high losses for this loan.

Two loans are currently on the servicer's watchlist: The fourth largest loan (Obelisco Portfolio, 10.7%), secured by a mixed office/industrial portfolio in Italy is in breach of the ICR cash trap covenant. The fifth largest loans (Petersbogen, 9.2%), secured by a shopping centre in Leipzig is in breach of the LTV default covenant. Moody's expected loss for the Obelisco Portfolio is low given the assessed LTV of 67% at loan maturity in December 2015. Moody's expects substantial losses with respect to the Petersbogen loan. Moody's LTV at loan maturity is 114%. The underlying value assessment is incorporating that almost half of the current rental income is subject to lease expiry in 2011.

The five largest loans combined contribute to 78% of the total pool. The remaining ten loans contribute between 0.3% and 4.6% to the total pool, respectively. Out of those loans, the Senior and the Junior Den Tir Loan (3.2% and 0.7%) have shown a payment default at the November 2010 Note IPD. The Senior Den Tir Loan represents an A-Note piece and the Junior Den Tir Loan is a B-Note piece of the Den Tir whole loan. The underlying shopping centre in Antwerp is facing significant cash flow deteriorations. Moody's current A-Loan LTV for this loan is 275% and the whole loan LTV is 335%.

All principal proceeds are allocated fully sequentially in this transaction as the sequential payment trigger has been hit. Therefore, credit enhancement through subordination is increasing for the Class A Notes over time.

Refinancing Risk: Five loans (representing 45% of the pool balance as per November 2010 IPD) have their maturity in 2011, five loans (30%) in 2012 and 2013 and the remainder beyond 2014. Moody's considers the property portfolio to be of average quality. Moody's adjustment of the refinancing risk assessment is primarily due to its current expectations that commercial real estate lending will remain scarce over the next two to three years. As highlighted in the Moody's Special Report "EMEA CMBS: 2011 Central Scenarios, Moody's assumes that CRE lending will slowly resume over the coming years but it will remain subject to strict underwriting criteria and depend heavily on the quality of the underlying properties. European non-prime property values are still under pressure given the scarcity of financing for this market segment and hence a meaningful recovery of non-prime property values is not expected before 2012/13. Given the average quality of the property portfolio coupled with the refinancing profile of this transaction, Moody's believes that this transaction is particularly exposed to the recovery of the lending market over the next two to three years.

Portfolio Loss Exposure: Moody's expects a very high amount of losses on the securitised portfolio, stemming mainly from the performance and the refinancing profile of the securitised portfolio. Given the default risk profile and the anticipated work-out strategy for defaulted and potentially defaulting loans, these expected losses are likely to crystallize only towards the end of the transaction term. The current subordination levels of 24.4% for the Class A, and 15.5% provide protection against these expected losses. However, the likelihood of higher than expected losses on the portfolio has increased substantially, which results in today's rating action.

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 06 October 2009. The last Performance Overview for this transaction was published on 3 February 2011. 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 monitor.cmbs@moodys.com. 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 no amendment resulting from that disclosure.

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings and public 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.

Frankfurt am Main
Stephan Ebe
Associate Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

New York
Andrea M. Daniels
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades Class A and Class B CMBS Notes issued by Juno (Eclipse 2007-2) LTD
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