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Global Credit Research - 20 Aug 2010
EUR 442 million of EMEA CMBS affected.
Frankfurt am Main, August 20, 2010 -- Moody's Investors Service has today placed on review for possible downgrade
the Class A1 and Class A2 Notes issued by Titan Europe 2006-5 p.l.c.
(amounts reflect initial outstandings):
EUR330M Class A1 Commercial Mortgage Backed Floating Rate Notes due 2019,
Aa1 (sf) Placed Under Review for Possible Downgrade; previously on
Nov 12, 2009 Downgraded to Aa1 (sf)
EUR112.3M Class A2 Commercial Mortgage Backed Floating Rate Notes
due 2019, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 12, 2009 Downgraded to Baa3 (sf)
The Class X Notes were not placed on review for possible downgrade as
Moody's believes that the Class X Notes have a different risk profile
in comparison to the other classes in the transaction given their characteristics.
The rating of the Class X Notes is therefore not directly affected by
the credit risk of the loan portfolio.
Moody's does not rate the class A3, B, C, D, E
and F Notes issued by Titan Europe 2006-5 p.l.c.
Titan Europe 2006-5 p.l.c. closed in December
2006 and represents the securitisation of initially eight commercial mortgage
loans originated by Credit Suisse International. The loans are
secured by first ranking mortgages over initially 41 commercial properties
located in Germany (94%) and Spain (6%). The properties
were predominantly mixed-use (51%, mostly multi-family)
and hotel (31%).
Since closing, there have been almost no changes in the portfolio
composition. One loan (Hotel Balneario Blancafort Loan --
6.1% of the initial portfolio balance) has been removed
from the portfolio. The remaining loans are not equally contributing
to the portfolio: the largest loan (the DIVA Multifamily Portfolio
Loan) represents 39.1% of the current portfolio balance,
while the smallest loan (the Hilite Warehouse Loan) represents 1.8%.
The current loan Herfindahl index is 3.6, compared to 4.2
at closing. The remaining loans are secured by 40 properties which
are still predominantly hotel (40.3%) and mixed-use/multi-family
(39.7%). All of the remaining properties are located
in Germany. The aggregate outstanding balance of the securatised
loans is EUR 615.9 million with the weighted average U/W whole
loan-to-value standing at 112.6%.
The DIVA Multifamily Portfolio Loan has defaulted and is in special servicing
since September 2008 due to insolvency of the borrower. Since October
2008, the loan is also in payment default.
The Quartier 206 Shopping Centre Loan is subject to payment default since
April 2010 IPD and has consequently been transferred to special servicing.
A revaluation of the underlying property (a shopping mall in prime retail
area in Berlin) as per January 2010 has shown a value decline of 47%
since closing. The significant value decline has triggered an appraisal
reduction mechanism and a control valuation event shifting the control
rights for this loan to the junior note from the B-note lenders.
The remaining loans are current; however the Hilite Warehouse Loan
is on the servicer's watchlist due to a cash trap event and the
Hotel Adlon Kempinski Loan (26% of the current pool; the second
largest loan) has breached its cash trap covenant as of July 2010 IPD.
Following the default of the largest loan, the sequential payment
trigger has been breached and all amortisation payments, prepayments
and repayments are allocated fully sequentially. The Class A1 Notes
rank senior to the Class A2 Notes. Since closing, the subordination
available to Moody's rated notes has marginally increased, from
50.1% to 51.8% for the Class A1 Notes and
from 33.1% to 34.1% for the Class A2 Notes.
Drawings under the liquidity facility occurred on most of the IPDs since
October 2008. This facility is used to cover interest shortfalls
under the DIVA Multifamily Loan and under the Quartier 206 Shopping Centre
Loan. Outstanding liquidity drawings as per July 2010 IPD are EUR
4.06 million. The Class C Notes (not rated by Moody's)
are subject to a partial interest deferral as of the July 2010 Note IPD
and the Class D, E and F Notes (not rated by Moody's) are
subject to full interest deferrals. The total deferred interest
amount outstanding as per July 2010 IPD is EUR 688,013.
Today's review action has been prompted by the significant deterioration
in cash flows generated by the property underlying the Quartier 206 Shopping
Centre Loan. This deterioration is mainly due to significant rental
waivers and tenants vacating the properties (current vacancy rate is about
16%). About half of the contracted rental income is contributed
by sponsor-related tenants with short term termination options.
Lease agreements with those tenants have been amended since closing and
lease payments have been waived for one to two years. The deterioration
in cash flows has resulted in a payment default of this interest-only
loan as per July 2010 IPD. EUR 0.58 million of interest
has been paid and the interest shortfall amounts to EUR 1.39 million.
The review action also reflects uncertainties around any potential restructuring
of this loans and the behaviour of the sponsor of the Quartier 206 Shopping
Centre Loan going forward.
Moody's will conclude its review after it has finalised its analysis of
the Quartier 206 Shopping Centre Loan focusing on (i) cash flow developments;
(ii) the property value; and (iii) the special servicer's strategy
for this loan. Moody's will also analyse the developments
of the other loans in the transaction, mainly of the DIVA Multifamily
Portfolio Loan and the Hotel Adlon Kempinski Loan.
The principal methodologies used in rating and monitoring the transaction
were "Update on Moody's Real Estate Analysis for CMBS Transaction in EMEA"
June 2005, "Moody's Updates on its Surveillance Approach for EMEA
CMBS" March 2009 and "Moody's Approach to Rating Structured Finance Securities
in Default", November 2009, which can be found at www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website. The
last Performance Overview for this transaction was published on 4 May
Further information on Moody's analysis of this transaction is available
on www.moodys.com. 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 email@example.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).
Frankfurt am Main
MD - EMEA Structured Fin
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Frankfurt am Main
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Deutschland GmbH
Moody's places the Class A1 and Class A2 EMEA CMBS Notes issued by Titan Europe 2006-5 p.l.c. on review for possible downgrade
An der Welle 5
Frankfurt am Main 60322
No Related Data.
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