EUR 184 million of CMBS affected
London, 19 March 2014 -- Moody's Investors Service (Moody's) has today taken rating action
on the following classes of Notes issued by TITAN EUROPE 2006-1
p.l.c .
Moody's rating action is as follows:
Issuer: TITAN Europe 2006-1 p.l.c.
....EUR112.05M (current outstanding
balance of EUR81M) B Notes, Downgraded to Ca (sf); previously
on Aug 7, 2012 Downgraded to Caa2 (sf)
....EUR39.76M (current outstanding
balance of EUR30M) C Notes, Affirmed C (sf); previously on
Aug 7, 2012 Downgraded to C (sf)
....EUR46.99M (current outstanding
balance of EUR35M) D Notes, Affirmed C (sf); previously on
Jul 5, 2011 Downgraded to C (sf)
....EUR50.61M (current outstanding
balance of EUR38M) E Notes, Affirmed C (sf); previously on
Jul 1, 2010 Downgraded to C (sf)
....X Notes, Downgraded to C (sf);
previously on Aug 22, 2012 Downgraded to Caa2 (sf)
Moody's does not rate the Class F, G, H and V notes.
RATINGS RATIONALE
Today's downgrade action reflects Moody's increased loss expectation
on the Tiden loan coupled with the fact that the underlying secondary
office portfolio needs to be sold within a remaining short tail period.
With less than two years to legal final maturity and ongoing insolvency
proceedings, Moody's expects the recoveries on the Tiden loan
to be significantly below the June 2012 valuation. Increased and
continuing liquidity drawing will increase the principal losses to the
class B note holders, this has been factored into our ratings.
The rating action for the Class X notes is driven by the increased expected
loss of the loan pool. The Class X Notes reference the underlying
loan pool. As such, the key rating parameters that influence
the expected loss on the referenced loan pool also influences the ratings
on the Class X Notes. The rating of the Class X was based on the
methodology described in Moody's Approach to Rating Structured Finance
Interest-Only Securities published in February 2012.
Methodology Underlying the Rating Action:
The principal methodology used in this rating was Moody's Approach to
Rating EMEA CMBS Transactions published in December 2013. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology.
Other factors used in this rating are described in European CMBS:
2014-16 Central Scenarios published in March 2014.
Factors that would lead to an upgrade or downgrade of the rating:
The main factor that could lead to a downgrade of the rating is a further
decline in the property values backing the underlying loans that is worse
than Moody's expectation, thereby leading to lower recoveries
on the loans.
The main factor that could lead to an upgrade of the rating is an increase
in the property values backing the underlying loans leading to loan recoveries
higher than Moody's expectation.
MOODY'S PORTFOLIO ANALYSIS
• TITAN EUROPE 2006-1 p.l.c. closed in
March 2006 and represents the securitisation of initially ten commercial
mortgage loans originated by Credit Suisse International.
• As of the January 2014 interest payment date, the transaction's
total pool balance was EUR 212.7 million down from EUR 723.7
million at closing due to repayments, prepayments and allocation
of workout proceeds. Only 4 of the original 10 loans remain in
the pool.
• All the loans are in default and in special servicing. Based
on Moody's revised assessment of underlying property values, the
loss expectation for the remaining pool is very large (>40%).
• The Tiden loan defaulted at maturity on 18 Jan 2013, following
which the Special Servicer had granted standstill period to the Borrower
and began the discussion of potential joint work-out options.
After negotiations failed, the insolvency proceedings commenced
in April 2013. In December 2013 an insolvency administrator was
appointed and subsequently an asset manager for the portfolio was appointed
with a view to commence asset sales in the near future. Moody's
expects sales proceeds to be significantly below the June 2012 portfolio
revaluation resulting in high loan level losses.
• Most of the assets of the KQ Warehouse loan and the Mangusta loan
have been sold and principal recoveries have been allocated to the Notes.
Moody's does not expect any significant recoveries on the KQ Warehouse
loan. On the Mangusta loan, closing of the sale on the 7
remaining assets is incomplete owing to ongoing legal proceedings,
Moody's expects significant losses on this loan.
• On the Nuremberg retail loan, the Special Servicer and the
Sponsor agreed to a discounted purchase offer of EUR 14.65 million
compared to an outstanding loan balance of EUR 16.3 million.
It was originally estimated that the DPO would close prior to the October
IPD 2013 however, the sponsor exercised certain extension rights
and the DPO is expected to complete by the April 2014 interest payment
date.
Portfolio Loss Exposure: Moody's expects a large amount of losses
on the remaining securitised portfolio as a whole and expects that losses
will eventually reach the Class B Notes. Given anticipated work-out
strategy for the loans, Moody's expects that the majority of the
losses will be allocated towards the end of the transaction term.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions of the disclosure form.
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of this transaction
in the past six months.
The analysis relies on a Monte Carlo simulation that generates a large
number of collateral loss or cash flow scenarios, which on average
meet key metrics Moody's determines based on its assessment of the
collateral characteristics. Moody's then evaluates each simulated
scenario using model that replicates the relevant structural features
and payment allocation rules of the transaction, to derive losses
or payments for each rated instrument. The average loss a rated
instrument incurs in all of the simulated collateral loss or cash flow
scenarios, which Moody's weights based on its assumptions
about the likelihood of events in such scenarios actually occurring,
results in the expected loss of the rated instrument.
As the section on loss and cash flow analysis describes, Moody's
quantitative analysis entails an evaluation of scenarios that stress factors
contributing to sensitivity of ratings and take into account the likelihood
of severe collateral losses or impaired cash flows. Moody's
weights the impact on the rated instruments based on its assumptions of
the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Anuj Radia
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Oliver Schmitt
Vice President - Senior Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades and affirms CMBS Notes issued by TITAN EUROPE 2006-1 p.l.c.
