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Rating Action:

Moody's downgrades two Classes of EMEA CMBS Notes issued by EuroProp (EMC VI) S.A.

02 Feb 2017

Approximately €445 Million of CMBS Affected

London, 02 February 2017 -- Moody's Investors Service has taken rating actions on the following classes of Notes issued by EuroProp (EMC VI) S.A.

....EUR380.25M Class A Notes, Downgraded to B1 (sf); previously on Aug 18, 2014 Affirmed Ba3 (sf)

....EUR30M Class B Notes, Downgraded to Caa3 (sf); previously on Aug 18, 2014 Affirmed Caa1 (sf)

....EUR35M Class C Notes, Affirmed C (sf); previously on Aug 18, 2014 Affirmed C (sf)

Moody's does not rate the Class D, E, F and the Class R Notes.

RATINGS RATIONALE

Today's downgrade action of the Class A Notes reflects Moody's expectation that the repayment of the Notes will happen after the legal final maturity of the Notes in April 2017 while Moody's continues to expect a full recovery on this Class of Notes.

The downgrade action of the Class B Notes reflects Moody's increased loss expectation for the pool since its last review, primarily due to a lower recovery expectation for the Sunrise II and Henderson -- Staples loans, together accounting for 48% of the outstanding pool balance.

These two loans are in the final stages of their respective workout processes and the expected sales proceeds for the remaining assets as presented in the latest special servicer reports indicate higher loss expectations.

Progress with the asset disposal for the Sunrise II loan has been slower than anticipated and the process is not expected to be concluded by the legal final maturity of the Notes. For the Henderson -- Staples loan a standstill agreement until March 2018 has been executed to facilitate the workout process.

Additionally, there is high uncertainty in respect of the recovery prospects for the Signac loan. The loan and the underlying real estate asset are subject to a safeguard plan by court order. As part of the plan, the maturity of the loan has been extended to June 2018. There are further court proceedings on-going in connection with the underlying transaction documentation.

The rating of the Class C Notes is affirmed based on the current expected loss that remains unchanged.

For a summary of Moody's key assumptions for the loans in the pool please refer to the section SUMMARY OF LOAN ASSUMPTIONS below.

Methodology Underlying the Rating Action:

The principal methodology used in these ratings was Moody's Approach to Rating EMEA CMBS Transactions published in November 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Other factors used in these ratings are described in European CMBS: 2016-18 Central Scenarios published in April 2016.

Factors that would lead to an upgrade or downgrade of the ratings:

Main factors or circumstances that could lead to a change of the ratings are a change in the expected loss on the loans.

MOODY'S PORTFOLIO ANALYSIS

EuroProp (EMC VI) S.A. closed in June 2007 and represents the securitisation of initially 18 commercial mortgage loans. Currently, four loans remain in the pool of which three loans have collateral remaining. The remaining collateral comprises of 18 retail and office properties in Germany and in France.

SUMMARY OF MOODY'S LOAN ASSUMPTIONS

Below are Moody's key assumptions for the remaining three loans with collateral.

Sunrise II loan (32% of the pool) -- LTV: 181%; in default, Expected Loss 40%-50%.

The loan is secured by a portfolio of retail properties located in predominantly secondary locations in Germany. Asset sales have been slow to date, out of the 15 properties remaining, 11 are subject to notarised sale and purchase agreements, three are under purchaser due diligence and one is marketed for sale.

Henderson - Staples loan (16% of the pool) -- LTV: 164%; in default, Expected Loss 40%-50%.

The loan is secured by a portfolio of office/retail properties located in Germany. Out of the remaining two, one sale has completed with the proceeds in transfer and one property is marketed for sale.

Signac loan (39% of the pool) -- LTV: 86%; in default, Expected Loss 40%-50%.

The loan is secured by an office property located near Paris in France. Following non-payment upon loan maturity in July 2011, the Borrower has been granted safeguard protection as well as a loan extension to June 2018 by court. The initial safeguard plan stipulated partial repayments during the extended term. However, no partial repayments have been received to date. On the basis of the court order there is currently no requirement for the Borrower to market the property for sale. The property has currently an occupancy rate of 63% and generates a net operating income of EUR2.2 million with a weighted average remaining lease term of less than five years.

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.

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.

Moody's did not use any stress scenario simulations in its analysis.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

Tobias S. Venzke
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

Oliver Moldenhauer
VP - Senior Credit Officer
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

No Related Data.
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