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Rating Action:

Moody's downgrades three classes of EMEA CMBS Notes issued by Europrop (EMC VI) S.A

14 Feb 2011

EUR 445 million of CMBS affected

London, 14 February 2011 -- Moody's Investors Service has today downgraded the following classes of notes issued by Europrop (EMC VI) S.A (amounts reflect initial outstandings):

Issuer: EuroProp (EMC VI) S.A.

....EUR380.25M Class A, Downgraded to Baa2 (sf); previously on Aug 13, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

....EUR30M Class B, Downgraded to B2 (sf); previously on Aug 13, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

....EUR35M Class C, Downgraded to Caa2 (sf); previously on Aug 13, 2010 B2 (sf) Placed Under Review for Possible Downgrade

Moody's does not rate the Classes D, E, F and R Notes issued by Europrop (EMC VI) S.A.

Today's rating action concludes the review for possible downgrade that was initiated for the Class A, B and C Notes on 13 August 2010 following the default of two loans in the pool, the EPIC Rhino and EPIC Horse Loans. Today's rating action takes Moody's updated central scenarios into account, 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 significantly since the last review in November 2009.

The rating downgrade on the Classes A, B and C Notes is due to Moody's expectation of increased refinancing default risk and loss assessment for the loans in the pool given (i) the high proportion of loan maturities in 2011 (42.5% of current pool balance) and 2012 (17.3%),(ii) the predominance of secondary quality properties in the pool, for which the availability of financing decreased over the past year (iii) the overall Moody's weighted average loan to value ratio (LTV) on the pool is above 100%, which makes refinancing in this lending market environment very unlikely, (iv) the limited increase in property values over the next two years given the continued upward yield pressure for non-prime properties and (v) the default of the EPIC Rhino and EPIC Horse Loans (12.5% of pool balance).

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 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 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) real estate fundamentals will remain weak 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

EuroProp (EMC VI) S.A. closed in June 2007 and represents the securitisation of 18 commercial mortgage loans. Seventeen loans were originated by Citibank International PLC and Citibank N.A., London and one loan was jointly originated by Citibank International PLC and Deutsche Bank AG. The loans are secured by first-ranking mortgages over 125 commercial properties located in Germany and France. Since closing the portfolio composition has not changed and based on the underwriter's ("U/W") market value as of October 2010, 89% of the properties are located in Germany and 11% are located in France (the Signac Loan is the only loan backed by a property located in France). The property types by U/W market values are retail (43.5%), office (26.4%), logistics (16.5%) and residential (13.6%).

Since closing none of the loans have fully repaid or prepaid. The current loan Herfindahl index is 9.4 and remains almost unchanged since closing as a result of no prepayments and only limited amortisation within the loan pool.

Since our last review of the transaction in November 2009, two loans, the EPIC Rhino and the EPIC Horse Loans (representing 6.9% and 5.6% of the pool balance as per October 2010 IPD respectively) have entered into special servicing due to a partial payment default as per July 2010 IPD. These are the only loans currently in special servicing in this transaction. The EPIC Rhino Loan is secured over eight residential properties located in Germany. The EPIC Horse Loan is secured by mixed use residential and commercial properties located in Germany. Both loans were re-valued as of September 2010 resulting in a value decline since closing of 28% and 22% respectively for the EPIC Rhino and EPIC Horse Loans. Based on the updated re-valuations the current LTV of the loans are 98.4% and 98.7% respectively, which is in line with Moody's current LTV for these loans. The special servicer is currently evaluating options on the workout of these loans. Moody's expects high losses to be realised on both of these loans.

The Signac Loan (10.3% of the current pool balance) continues to be in breach of its ICR and LTV covenant, which constitutes an event of default under the loan agreement. The loan, which is secured by a non-prime office building in the suburbs of Paris is exposed to significant lease roll over risk due to lease break options or lease expiries representing about 72% of rental revenues in or shortly after its maturity date in July 2011. Moody's did factor into its analysis the short term nature of office lease terms in France when deriving a sustainable cash flow. The current reported Whole Loan LTV for this loan is 82% compared to the current Moody's Whole Loan LTV of 112%.

The largest loan in the pool is the Sunrise II Loan (23.3% of the current pool balance). The loan represents a 50% pari passu syndication interest in the whole loan with a total outstanding loan balance of EUR218.3million.The loan is secured by 48 mainly retail properties across twelve German Federal States. The locations of the properties are generally medium sized towns and suburban locations of major cities. The reported vacancy rate as per the October 2010 IPD is approximately 16% compared to 1% at closing. The current reported LTV on this loan is 85% compared to the current Moody's LTV of 120%. Moody's property value estimate considers the (i) secondary quality of the buildings and (ii) some potential rental income deterioration resulting mainly from the existing lease expiry profile. The refinancing risk for the loan which matures in July 2011, has increased significantly since Moody's last review.

Gutperle Loan (13.3% of the current pool): The loan is secured by two industrial warehouses located in Offenbach and Minden in Germany with loan maturity date in January 2012. The Offenbach property is fully let to Daimler Chrysler KG with Daimler AG (A3) jointly and severally liable for all duties under the lease until January 2021. The Minden property is fully let to ESM Ertl Systemlogistik GmbH & Co. until July 2012. The main challenge faced by this loan is the upcoming refinancing. The short remaining lease term on the Minden property could potentially hinder the refinancing of the loan. Moody's estimated Whole Loan LTV for this loan at maturity is 90% which takes into account the short remaining lease term on the Minden property.

The Henderson Staples Loan (8.6% of pool balance as per October 2010 IPD) has been facing difficulties with tenants arrears since April 2010. As per the October 2010 IPD, tenants representing 57% of the gross income are still in arrears. The reported vacancy is 19% compared to full occupancy at closing. The reported ICR is 0.41x. All interest payments on the loan have been met to date. The current reported UW LTV is 72% compared to the current Moody's LTV of 143%. Moody's property value considers (i) the secondary quality of the properties (ii) the current vacancy levels and (iii) rental income volatility based on high tenant arrears as well as the existing lease expiry profile.

Moody's highlights that the Luneburg, Henderson 1 and the Bardowick loans (collectively representing 4.8% of the pool balance as per October 2010 IPD) are exposed to significant lease roll over risk due to lease break options or lease expirations on or shortly after their maturity dates which could adversely affect the refinancing for these loans.

Refinancing Risk: Four loans (representing 42.5% of the pool balance as per October 2010 IPD) have their maturity in 2011, two loans (17.3%) in 2012 and the remainder in 2013. Moody's considers the properties 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 2011 EMEA CMBS Central Scenarios report, 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 crystallise only towards the end of the transaction term. The current subordination levels of 22.8% for the Class A, 16.6% for the Class B and 9.3% for the Class C 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 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.

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 November 2009. The last Performance Overview for this transaction was published on 25 January 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, public information and confidential and proprietary Moody's Investors Service's information.

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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.

London
Kamini Pithia
Asst Vice President - 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
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service Ltd.
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Moody's downgrades three classes of EMEA CMBS Notes issued by Europrop (EMC VI) S.A
No Related Data.
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