TEXT-Fitch affirms Vanwall Finance, outlook stable
Dec 17 - Fitch Ratings has affirmed Vanwall Finance plc, as follows: GBP164.8m class A (XS0242555570) affirmed at 'AAAsf'; Outlook Stable GBP87.1m class B (XS0242558244) affirmed at 'BBBsf'; Outlook Stable GBP34.9m class C (XS0242558913) affirmed at 'BBsf'; Outlook Stable GBP17.4m class D (XS0242559994) affirmed at 'Bsf'; Outlook Stable GBP31.8m class E (XS0242561032) affirmed at 'B-sf'; Outlook Stable GBP10.2m class F (XS0242561891) affirmed at 'B-sf'; Outlook Stable The affirmations reflect the underlying loan's stable performance since the last rating action in January 2012. Total net income has increased to GBP34.8m from GBP27.5m at closing due to various rental uplifts (both indexed to RPI and to market rent) under the terms of the lease agreements. As a result of the exposure to the sole tenant, Toys 'R' Us Limited, the UK subsidiary of Toys 'R' Us Inc. ( 'B'/Stable), Fitch assumes a day-one default of the tenant in all rating scenarios and consequently a default on the loan. Fitch estimates the leverage to be in excess of 100%, which indicates that the borrower could face major difficulties at loan maturity should the performance of the tenant decline. In this scenario the agency believes classes E and F would be subject to potential losses. Under scenarios where the tenant continues to meet its rental obligations, Fitch estimates a loan-to-value (LTV) ratio for the securitised A-note and whole loan at 83% and 98%, respectively. While an orderly refinancing may also be challenging under these assumptions, a gradual sell down of the assets and concurrent loan amortisation through substantial excess rental income should ease the full repayment of the securitised bonds (reported interest coverage ratio stands at 2.0x, but it is likely to significantly improve after loan maturity, when the interest rate swap would have expired). Vanwall Finance plc is the securitisation of a single loan secured by a portfolio of 29 retail warehouses and a single distribution warehouse, all fully-let to Toys 'R' Us Limited on identical leases with 22 years remaining. Fitch will continue to monitor the transaction's performance. A performance update report will be available shortly on www.fitchratings.com. Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. The sources of information used to assess these ratings were the issuer, servicer, and periodic cash manager and servicer reports. Applicable criteria, 'EMEA CMBS Rating Criteria', dated 4 April 2012, 'Global Structured Finance Rating Criteria', dated 6 June 2012, are available at www.fitchratings.com. Applicable Criteria and Related Research: EMEA CMBS Rating Criteria Global Structured Finance Rating Criteria
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