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Rating Action:

Moody's downgrades and maintains on review for possible downgrade two Commercial Real Estate Loans related to a Sale-and-Lease Back Transaction with BBVA

23 Aug 2012

London, 23 August 2012 -- Moody's Investors Service has downgraded and maintained on review for possible downgrade the following commercial real estate loans advanced to Tree Inversiones Inmobiliarias, S.A. (the "Borrower") :

Issuer: BBVA EUR 1,251 million Secured Loans

....EUR 1,139.0 million Senior Loan maturing in September 2017, Downgraded to Ba2 and Remains On Review for Possible Downgrade; previously on Mar 13, 2012 A3 Placed Under Review for Possible Downgrade

.... EUR 112.2 million Mezzanine Loan maturing in May 2017, Downgraded to B1 and Remains On Review for Possible Downgrade; previously on Mar 13, 2012 Baa2 Placed Under Review for Possible Downgrade

RATINGS RATIONALE

Today's downgrade reflects Moody's increased loss expectation for the loans since its last review in March 2012. This is primarily due to a sharp increase in term risk resulting from the six-notch downgrade of the sole tenant Banco Bilbao Vizcaya Argentaria, S.A. ("BBVA") to Baa3 from Aa3 since the last review.

The term risk of both loans is linked to the credit strength of BBVA due to its role as lease guarantor under the leases. However further stress was applied because (i) no SPV structure in place whereby the borrower is bankruptcy remote and (ii) given the complex legal/tax structure, any adverse credit events occurring beyond Moody's current expectations.

BBVA's rating is still on review for further possible downgrade. Upon a downgrade of BBVA to Ba2 or lower, an LTV test will be triggered with a breach resulting in a partial prepayment or deposit made by the borrower in the rectification account (by selling properties and repaying the senior loan or by sponsors injecting equity). A failure to prepay or deposit will result in a loan event of default. No cash flow analysis have been conducted for the Mezzanine Loan as the rating is linked to its recovery expectations given its ranking and the credit strength of BBVA (but stressed because of the factors previously mentioned). The Mezzanine Loan is expected to fully amortise by its maturity date in May 2017, assuming funds are not switched off due to a Senior Loan non-payment.

Moody's will conclude its review of the loans following the conclusion of BBVA's rating review as well as clarification of the impact of the above trigger on the Mezzanine loan.

The key parameters in Moody's analysis are the default probability of the 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.

In general, Moody's analysis reflects a forward-looking view of the likely range of commercial real estate 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 such as property value or loan refinancing probability for instance, may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortisation and loan re- prepayments 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 2013, while remaining subject to strict underwriting criteria and heavily dependent on the underlying property quality, (ii) strong differentiation between prime and secondary properties, with further value declines expected for non-prime 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 anticipated economic recovery. Overall, Moody's central global macroeconomic scenario is for a material slowdown in growth in 2012 for most of the world's largest economies fueled by fiscal consolidation efforts, household and banking sector deleveraging and persistently high unemployment levels. We expect a mild recession in the Euro area.

As the Euro area crisis continues, the rating of the structured finance notes remain exposed to the uncertainties of credit conditions in the general economy. The deteriorating creditworthiness of euro area sovereigns as well as the weakening credit profile of the global banking sector could negatively impact the ratings of the notes. Furthermore, as discussed in Moody's special report "Rating Euro Area Governments Through Extraordinary Times -- An Updated Summary," published in October 2011, Moody's is considering reintroducing individual country ceilings for some or all euro area members, which could affect further the maximum structured finance rating achievable in those countries.

The principal methodology used in this rating was Moody's Approach to Real Estate Analysis for CMBS in EMEA: Portfolio Analysis (MoRE Portfolio) published in April 2006. 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: 2012 Central Scenarios published in February 2012.

The updated assessment is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's prior assessment is summarised in a press release dated 13 March 2012. The last Performance Overview for this transaction was published on 10 July 2012.

In rating this transaction, Moody's used both MoRE Portfolio and MoRE Cash Flow to model the cash-flows and determine the loss for the Senior Loan. MoRE Portfolio evaluates a loss distribution by simulating the defaults and recoveries of the underlying Senior Loan using a Monte Carlo simulation. This loss distribution, in conjunction with the loss timing calculated in MoRE Portfolio is then used in MoRE Cash Flow, where for each loss scenario on the assets, the corresponding loss for the senior loan is calculated taking into account structural features. As such, Moody's analysis encompasses the assessment of stressed scenarios.

Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Information source used to prepare the rating is the following: parties involved in the ratings.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a 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.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 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.

Ramzi Kattan
Asst Vice President - 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

Christophe de Noaillat
Associate Managing Director
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 maintains on review for possible downgrade two Commercial Real Estate Loans related to a Sale-and-Lease Back Transaction with BBVA
No Related Data.
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