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Rating Action:

Moody's downgrades Class A1 and Class A2 CMBS Notes issued by Titan Europe 2006-5 p.l.c.

Global Credit Research - 11 Feb 2011

EUR442.3 million of EMEA CMBS affected

London, 11 February 2011 -- Moody's Investors Service has today downgraded the Class A1 Notes and Class A2 Notes issued by Titan Europe 2006-5 p.l.c. (amounts reflect initial outstandings):

....EUR330M Class A1 Notes, Downgraded to A1 (sf); previously on Aug 20, 2010 Aa1 (sf) Placed Under Review for Possible Downgrade

....EUR112.3M Class A2 Notes, Downgraded to B1 (sf); previously on Aug 20, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

The Class X Notes is currently rated Aaa (sf). Moody's does not rate the Class A3, B, C, D, E and Class F.

Today's rating action concludes the review for possible downgrade that was initiated for the Class A1 and A2 Notes on August 20, 2010. 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 November 2009.

The rating downgrade on the Class A1 and Class A2 Notes is mainly due to the significant negative performance issues involving two of the top three loans in the pool (58% of current pool balance), namely the DIVA Multifamily Portfolio loan and the Quartier 206 Shopping Centre loan.

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 a 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

This transaction which closed in December 2006, represents the securitization of initially eight commercial mortgage loans originated by Credit Suisse International. Since closing, one loan (Hotel Balneario Blancafort Loan -- 6.1% of the initial portfolio balance) has repaid. The current loan Herfindahl index is 3.6, compared to 4.2 at closing. The remaining loans are not equally contributing to the portfolio: the largest loan (the DIVA Multifamily Portfolio loan) represents 39.1% of the current portfolio balance, while the smallest loan (the Hilite Warehouse loan) represents 1.8%. The remaining loans are secured by 40 properties which are predominantly hotel (40.3%) and mixed-use/multi-family (39.7%). All of the remaining properties are located in Germany. The aggregate outstanding balance of the securitised loans is EUR614.4 million with the weighted average U/W whole loan-to-value ratio (LTV) standing at 112.5% as compared to Moody's weighted average LTV of 135%.

The DIVA Multifamily Portfolio loan is secured by a large residential portfolio (482,000 square meters) located in Eastern Germany and Berlin. The loan has defaulted and is in special servicing since September 2008 due to insolvency of the borrower. Since October 2008, the loan is also in payment default. In December 2009 the property portfolio was revalued at EUR193.9 million reflecting a decline of 42% compared to closing (December 2006). As a result, the current LTV is 140% on a whole loan basis and 128% based on the securitised loan amount. This compares to Moody's LTVs of 151% and 133% respectively (similar to Moody's last review in November 2009).

Compared to last review, there remains very limited visibility over the (quarterly) cash flows currently generated by the individual properties of the portfolio and over the amount of distributions that can be expected from the insolvency administrator of the borrower over time. Regarding the disposal/liquidation plan for the portfolio, there has been some clarity from the special servicer around the marketing plan and potential timing of the sales.

Moody's understands that the current work out strategy for the loan includes a potential (partial) sale of the portfolio with a targeted completion date of mid-2011. Taking into account (i) the below average quality of the property portfolio coupled with the subdued lending and investment market, especially for such properties, in the next two to three years; (ii) the increased LTV compared to closing; and (iii) the out-of-the-money interest rate swap with a maturity date in 2016, this could result in net sales proceeds below allocated loan amounts if (partial) disposals are completed in the foreseeable future. The actual amounts received depend ultimately on the final combined decision of the insolvency administrator and special servicer .

The Quartier 206 Shopping Centre loan (18.7% of the current pool) is the third largest loan and secured by a shopping mall a prime retail area of Berlin. This interest-only loan is in special servicing following a payment default in April 2010. The ongoing payment default is due to a significant deterioration in cash flows generated by the property resulting from rental waivers and tenants vacating the property (current vacancy rate is about 13%). About half of the contracted rental income is contributed by sponsor-related tenants. Some of these sponsor related tenants have contractual options for short term termination. Lease agreements with the sponsor-related tenants were amended since closing and lease payments were partially waived and reduced for one to two years. Since the payment default occurred, a large part of the EUR2.0 million quarterly interest payments were deferred. Interest payments to noteholders have been funded by several liquidity drawings. A revaluation of the underlying property as per January 2010 indicated a value decline of 47% since closing. This has triggered an appraisal reduction mechanism and a control valuation event shifting the control rights for this loan to the junior note from the B-note lenders. The current U/W LTV is 150% on a whole loan basis compared an LTV of 80% at closing. Moody's understands that the special servicer initiated a restructuring of the loan (including negotiations with the borrower) and that a restructuring advisor/ auditor was appointed by the borrower in 2010 with an aim to de-lever the loan. However, Moody's has limited visibility on the actual progress made to date. As the sponsor (who is also involved in the DIVA Multifamily Portfolio and Hotel Adlon Kempinski loans) has not made any contributions since closing, Moody's has given no sponsor benefit.

Moody's current property value of EUR77 million is about 20% lower than the most recent underwriter value and considers the prime quality of the property, however the value is negatively impacted by (i) the underperformance of the property management reflected in the drop of rental cash flows and existing vacancy; (ii) the high future lease roll over (approximately 40% of the current rent matures in the next two years); (iii) existing vacancy of about 13% and (iv) lease waivers applied to date. As a result, Moody's current whole loan LTV is 188%. The downgrade action also reflects uncertainties around any potential restructuring of this loan and the behavior of the sponsor going forward.

The Hotel Adlon Kempinski loan (26.0% of the current pool) is secured a prime 385-room, 5-star hotel property located in Berlin. This fixed rate loan underperforms Moody's expectations as the rental income decreased by approximately 10% since closing. This decline is related to a sponsor-related tenant leasing the restaurant area. The lease agreement with this tenant has been amended and lease payments have been waived. The current (fixed) rent is based on a seven year remaining lease (with option to break a year earlier) with the hotel operator (Kempinski). The loan is on the Servicer's watchlist as the current reported debt service coverage ratio (DSCR) of 1.45x is below the cash trap trigger (1.50x) since Q1 2010. As a result EUR4 .5 million surplus funds have been trapped. The reported DSCR is based on the net operating income (NOI) of the hotel property and related facilities. To date, all loan interest payments have been made in full. Moody's current property value of EUR159 million is about 45% lower than the underwriter value of EUR288 million (unchanged since closing). Moody's current value takes into account (i) the specific property type; (ii) the current subdued 5-star hotel market in Berlin; and (iii) the reduced rental cash flows (and NOI) since closing. However, benefit is given for the prime nature of the property. As a result, Moody's current LTV is 101% which is expected to only slightly improve towards maturity in July 2016.

The remaining loans are all current; however the Hilite Warehouse loan is on the servicer's watchlist due to a cash trap event.

Following the default of the largest loan, the sequential payment trigger has been breached and all amortisation payments, prepayments and repayments are allocated fully sequentially. The Class A1 Notes rank senior to the Class A2 Notes. Since closing, the subordination available to Moody's rated notes has marginally increased, from 50.1% to 51.8% for the Class A1 Notes and from 33.1% to 34.1% for the Class A2 Notes.

Drawings under the liquidity facility occurred on most of the IPDs since October 2008. This facility is used to cover interest shortfalls under the DIVA Multifamily Portfolio loan and the Quartier 206 Shopping Centre loan. Outstanding liquidity drawings as per January 2011 IPD are EUR8.2 million (EUR4.1 in July 2010). The Class C Notes (not rated by Moody's) are subject to a partial interest deferral as of the January 2011 Note IPD and the Class D, E and F Notes (not rated by Moody's) are subject to full interest deferrals. The total deferred interest amount outstanding as per January 2011 IPD is EUR1.2 million.

Portfolio Loss Exposure: Moody's notes the bifurcated nature of the loan pool and expects a considerable amount of losses on the securitised portfolio, stemming from the DIVA Multifamily Portfolio loan and the Quartier 206 Shopping Centre loan. Given Moody's reduced property recovery value and increased default risk for these loans, the risk of potential losses arising for the Class A1 and A2 Notes has increased resulting in the today's rating downgrade for these classes of Notes.

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 did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. Moody's does not have access to the underlying portfolio information relating to the non recoverable costs.

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 12 November 2009. 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 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.

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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

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

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Moody's downgrades Class A1 and Class A2 CMBS Notes issued by Titan Europe 2006-5 p.l.c.
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