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Rating Action:

Moody's downgrades four Classes of CMBS Notes issued by Centaurus (Eclipse 2005-3) plc

17 Mar 2011

Class X Notes remains on review for possible downgrade

Frankfurt am Main, March 17, 2011 -- Moody's Investors Service has today downgraded the Class A Notes, Class B Notes, Class C Notes and Class D Notes issued by Centaurus (Eclipse 2005-3) plc (amount reflects initial outstandings):

Issuer: CENTAURUS (ECLIPSE 2005-3) plc

....EUR381.2M Class A Notes, Downgraded to A3 (sf); previously on Sep 30, 2009 Downgraded to A1 (sf)

....EUR61.9M Class B Notes, Downgraded to Ba1 (sf); previously on Sep 30, 2009 Downgraded to Baa2 (sf)

....EUR97.7M Class C Notes, Downgraded to B2 (sf); previously on Sep 30, 2009 Downgraded to Ba3 (sf)

....EUR94.5M Class D Notes, Downgraded to Caa1 (sf); previously on Sep 30, 2009 Downgraded to B3 (sf)

The rating on the Class X Notes was placed on review for possible downgrade on 2 March 2011 following Moody's new operational risks criteria. Moody's will complete the review of the rating on the Class X Notes by September 2011, as required by European regulations. Moody's does not rate the Class E Notes.

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 September 2009.

Moody's increased loss expectation is due to the increased refinancing default risk assessment for all five loans in the pool. The re-assessment is driven by i) the expected high leverage at maturity based on Moody's value of the collateral, ii) the size and complexity of the debt to be refinanced and iii) the existing uncertainty with respect to the path and timing of a recovery in the lending market, especially with respect to the significant amount of German multifamily debt competing for refinancing in 2012 and 2013.

The risk profile of this transaction is sensitive to a scenario in which a portion of the pool consisting of above average credit quality loans is repaid, as the proceeds would be allocated on a pro-rata basis with no release premium. This risk has been incorporated in Moody's ratings since closing.

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; we expect 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 January 2011 interest payment date, the transaction's total pool balance was EUR 593.4 million down by 9% due to scheduled amortization and some minor property disposals.

Centaurus (Eclipse 2005-3) plc represents a true sale of a portion of five cross-defaulted but not cross-collateralised senior loans (the "Senior Loans") secured by about 30,000 multifamily units plus some commercial units and parking spaces located in mostly economically and demographically weaker regions in Western Germany. The properties were initially held by five companies that owned and managed the properties until two Blackstone funds acquired those companies in 2004. The purchase of the companies was financed through a complex debt structure which includes (i) the Senior Loans, (ii) five senior ranking revolving credit facilities, (iii) continuing debt that was predominately ranking senior to the Senior Loans, and (iv) five Junior Loans. At closing in December 2005, a pro-rata portion of 75.43% of the Senior Loans was securitised in this transaction. Since closing of the transaction, the Blackstone funds sold the majority stake in the borrower group to a consortium of institutional investors. All five partially amortising Senior Loans (and Junior Loans) mature in September 2012.

One of the five Junior Loans has fully prepaid. The remaining four Junior Loans are on the servicer's watchlist since February 2009 as interest payments are being deferred.

The cash flows generated by the properties are stable and within Moody's expectations. The underwriter's value of the properties was EUR 1.43 billion at closing. Currently, the portfolio is valued at EUR 1.48 billion as per the last revaluation in December 2009. Moody's updated value assessment is EUR 1.12 billion, almost unchanged since the last transaction review in September 2009.

On an aggregated portfolio basis, Moody's current LTV is 105% based on the Senior Loans, revolving credit facilities currently drawn, continuing debt , Junior Loans and accrued interest on Junior Loans. Moody's does not expect any noteworthy unit disposals until loan maturity and expects its current LTV ratio to only slightly decrease through maturity due to scheduled amortisation.

Given this high leverage level and the strong competition for refinancing of German multifamily properties in a delayed lending market recovery, Moody's has increased significantly its default assumptions at maturity in September 2012.

This substantial probability of default in turn leads to a considerable expected loss assumption. The current credit enhancement levels provides some cushion for those losses, especially for the more senior classes of Notes. The sequential paydown of all amortisation proceeds will further increase credit enhancement for the Class A Notes. However, Moody's believes that next to the refinancing risk a main weakness of the transaction remains the non-cross collateralisation of the loans, paired with (i) missing release premia upon prepayments or repayments of whole loans by the borrowers (which could happen for example if a borrower is sold and its debt prepaid or if a borrower successfully refinances its debt while others do not) and (ii) the pro-rata allocation of repayment at maturity and prepayment proceeds. In a scenario where refinancing the whole debt amount or selling the total property portfolio appears not possible, adverse selection might occur in terms of refinancing or repaying the better (lower levered) loans without a release premium and potential pro-rata allocation of the proceeds, while the transaction remains exposed to the less performing loans and borrowers without building up incremental subordination for the more senior notes.

RATING METHODOLOGY

The principal methodologies used in this rating were "Update on Moody's Real Estate Analysis for CMBS Transaction 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 30 September 2009. The last Performance Overview for this transaction was published on 2 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 New Issuer 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 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
Oliver Schmitt
Vice President - Senior 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 four Classes of CMBS Notes issued by Centaurus (Eclipse 2005-3) plc
No Related Data.
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