TEXT-Fitch upgrades GK MLOX3 class B notes; affirms others

(The following statement was released by the rating agency)

Sept 21 - Fitch Ratings has upgraded GK MLOX3 class B notes due June 2015 and affirmed the rest. The transaction is a Japanese multi-borrower type CMBS securitisation. The rating actions are as follows:

JPY1.4bn* Class B notes upgraded to 'Asf'' from 'BBB-sf''; Outlook Stable

JPY2.6bn* Class C notes affirmed at 'Bsf''; Outlook Stable

JPY1.78bn* Class D notes affirmed at 'CCsf''; Recovery Estimate revised to 35% from 45%

*as of 20 September 2012

The upgrade of the class B notes reflects improved credit enhancement following the substantial principal repayment of the underlying loans. Since the previous rating action in September 2011, two out of the then three remaining underlying loans were repaid or recovered in full, and four of the 13 properties backing the remaining defaulted loan have been sold. All of these contributed to a substantial repayment of the transaction, with the class A fully redeemed in August 2012.

Fitch has revised downwards its net cash flow estimates for four out of nine remaining collateral properties, reflecting the collateral properties' recent weaker-than-expected performance. However, this has been more than offset by the progress of the repayment so far.

The class C notes also benefited moderately from the repayment of the underlying loans, leading to today's affirmation of this class.

Fitch assigned ratings to this transaction in September 2007. The transaction was initially a securitisation of five loans backed by 25 property trust beneficiary interests. It is currently backed by one defaulted loan, which in turn is backed by nine properties.