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Announcement:

Moody's places Class A3, B, C, and D CMBS Notes issued by Deco 14 -- Pan Europe 5 B.V. on review for possible downgrade

08 Apr 2011

EUR 331 million of CMBS affected

London, 08 April 2011 -- Moody's Investors Service has today placed on review for possible downgrade the following classes of Notes issued by Deco 14 -- Pan Europe 5 B.V. (amount reflecting initial outstanding):

EUR65M Class A-3 Notes, Aa2 (sf) Placed Under Review for Possible Downgrade; previously on May 21, 2009 Downgraded to Aa2 (sf)

EUR100M Class B Notes, A1 (sf) Placed Under Review for Possible Downgrade; previously on May 21, 2009 Downgraded to A1 (sf)

EUR65M Class C Notes, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on May 21, 2009 Downgraded to Baa1 (sf)

EUR101M Class D Notes, B1 (sf) Placed Under Review for Possible Downgrade; previously on May 21, 2009 Downgraded to B1 (sf)

Moody's does not rate the Class E, Class F, Class G and the Class X Notes issued by DECO 14 - Pan Europe 5 B.V. Today's review 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.

The review of the Class A3, B, C and D Notes has been primarily prompted by Moody's increased loss expectation for the pool driven by higher expected default rates at the loans' maturity dates. To a lesser extent, it has also been prompted by a recent claim that was filed by the City of Dresden against some subsidiaries of Gagfah S.A. ("Gagfah"). Gagfah is the parent company of the borrowers under the WOBA Loan, which contributes 39% to the current pool balance. While the information regarding the claim against the sponsor is limited at this stage, it is likely to involve the borrowers of the WOBA Loan, increasing the risk of a potential default under the loan, in Moody's view.

DECO 14 - Pan Europe 5 B.V. closed in March 2007 and represents the securitisation of initially 13 mortgage loans originated by Deutsche Bank A.G. and Deutsche Bank S.p.A. Currently 12 loans remain and the loans are secured by first-ranking legal mortgages over 3,914 commercial and multi-family properties. The properties are located throughout Germany (88% of the current pool by underwriter market value), Italy (8%) and Bulgaria (4%). The properties are predominantly multi-family (75%) followed by office (14%) and retail (10%) use. The remaining property types comprised of mixed-use and hotel.

One loan, (4% of the current pool) matures in 2012 while two loans (50%) mature in 2013 and seven loans (37%) mature in 2014. The remaining two loans mature later, in 2015 and 2016, respectively. In Moody's opinion, for almost all loans in the pool, the default risk at maturity has increased since its last review. This is driven by the expected slow recovery of values over the coming years and the scarcity in available funding for highly leveraged loans.

As per the latest information available on the transaction (January 2011), there were two loans in special servicing: the Arcadia Loan contributing 7.6% and the DD Karstadt Hilden Loan contributing 0.4%. Both loans are subject to payment defaults and represent the only loans on the Servicer's watchlist.

In respect of the claims relating to the WOBA Loan, Moody's understands that the City of Dresden has taken legal action against certain subsidiaries of Gagfah . The accusations center around the sale of the City's former housing association WOBA Dresden to Gagfah in 2006. According to both public press releases as well as press releases from Gagfah, the City accuses the Gagfah entities to be in breach of certain aspects of the sale and purchase agreement that WOBA entities entered into at the time of the privatisation. The sale of the WOBA entities included a number of obligations leaned towards a social charta that aimed to protect the tenants and the housing association as such. Gagfah has announced in a statement that in its view it is in full compliance with all key terms of the social charta.

The WOBA Loan has been granted to -- inter alia -- WOBA Dresden GmbH and some of its subsidiaries, which Moody's expects to be involved in this claim. The loan is syndicated and 50% of the loan (EUR 557.6 million) is securitised in DECO 14 - Pan Europe 5 B.V. Moody's currently assumes that the security position of the WOBA Loan securing the Notes is still valid. Hence the sensitivity of the Notes does not stem from changes to Moody's recovery assumptions under the loan.

The current subordination levels of 38% for the Class A1 Notes and 27% for the Class A2 Notes provide protection against the increased expected losses from the portfolio. Given that the WOBA Loan contributes 39% to the portfolio balance, the Class A1 and A2 Notes are currently not sensitive to the impact of the legal claims in relation to the WOBA Loan; therefore they were not affected by today's review action. The Class A3, B, C, and D Notes on the other hand are subordinated in the transaction and are deemed more likely to be negatively impacted by the increased expected loss for the portfolio as well as an adverse performance of the WOBA Loan.

Moody's will conclude its review of the Notes after it has finalised its analysis on the loans in the portfolio with a focus on re-assessing the refinancing risk of the loans. Moody's analysis will also factor in any additional risks posed to the noteholders in relation to the WOBA Loan.

RATING METHODOLOGY

The principal methodologies used in this rating was "Update on Moody's Real Estate Analysis for CMBS Transaction in EMEA", published in June 2005.

The updated assessment is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. The last Performance Overview for this transaction was published on 21 March 2011.

For updated monitoring information, please contact monitor.cmbs@moodys.com. To obtain a copy of Moody's New Issue 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).

London
Deniz Yegenaga
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Christophe de Noaillat
Senior Vice President
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

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 places Class A3, B, C, and D CMBS Notes issued by Deco 14 -- Pan Europe 5 B.V. on review for possible downgrade
No Related Data.
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