TEXT - Fitch cuts Titan Europe 2006-5 plc ratings
Nov 14 - Fitch Ratings has downgraded Titan Europe 2006-5 plc's classes A3 to F and affirmed all others classes; as follows: EUR140.0m Class A1 (XS0277721618) affirmed at 'AAsf'; Outlook Stable EUR109.0m Class A2 (XS0277725361) affirmed at 'Asf'; Outlook Stable EUR60.1m Class A3 (XS0277726500) downgraded to 'Bsf' from 'BBsf'; Outlook Negative EUR55.1m Class B (XS0277728381) downgraded to 'CCsf' from 'CCCsf'; Recovery Estimate (RE) 30% EUR7.9m Class C (XS0277729439) downgraded to 'Dsf' from 'CCsf'; RE0% EUR0.0m Class D (XS0277732144) downgraded to 'Dsf' from 'Csf'; RE0% EUR0.0m Class E (XS0277733548) downgraded to 'Dsf'from 'Csf'; RE0% EUR0.0m Class F (XS0277734199) downgraded to 'Dsf' from 'Csf'; RE0% The downgrade of the class A3 to F notes were driven by lower than expected recoveries on the Diva loan and the performance deterioration of the Quartier 206 loan. Diva recovered EUR159.6m (net of senior costs) from the sale of the German multifamily portfolio, which was applied sequentially to the class A1 notes. The resulting losses of EUR86.4m have been allocated to the bottom four classes of notes although senior costs (which equated to 21.6% of gross recoveries) were greater than initially anticipated and have caused a larger write down of the class C notes than expected. The credit quality of the Quartier 206 loan has continued to deteriorate: a major tenant, previously responsible for circa 9% of passing rent, vacated the premises in August 2012; as a result, the vacancy rate rose to 24% from 21% by area. Fitch believes there is scope for income stabilisation, mainly due to the asset's good location; however, the current pace of income decline could lead to interest shortfalls on the loan, if the asset management efforts are not successful. Fitch believes that the EUR160m Hotel Adlon loan provides the bulk of investment grade recoveries. Although the class A1 debt yield of 20% and a Fitch advance rate of 33.7% are in many instances commensurate with a higher rating, the exposure to a single asset loan has effectively capped the class A1 rating at 'AAsf'. Titan Europe 2006-5 plc closed in December 2006 and was originally the securitisation of eight commercial loans originated by Credit Suisse ('A'/Stable/'F1'). At the first interest payment date (IPD), the EUR40.2m Hotel Balneario Blancafort loan defaulted due to non-payment of debt service and was subsequently repurchased by the originator. The only other loan to have repaid is the aforementioned Diva loan leaving the portfolio with six loans secured over 32 properties located across Germany with an aggregate securitised balance of EUR372.1m.