TEXT - Fitch cuts Titan Europe 2006-5 plc ratings

Wed Nov 14, 2012 12:57pm EST

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.
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