TEXT-Fitch upgrades Triton (European Loan Conduit No. 26) plc
Jan 28 - Fitch Ratings has upgraded Triton (European Loan Conduit No. 26) Plc's notes, as follows: GBP77.8m Class A1 (XS0294600514) upgraded to 'AAsf' from 'Asf'; Outlook Stable GBP23.0m Class A2 (XS0294602486) upgraded to 'AAsf' from 'Asf'; Outlook Stable USD87.3m Class B (XS0294620207) upgraded to 'Asf' from 'BBBsf'; Outlook Stable GBP12.0m Class C (XS0294603294) upgraded to 'BBsf' from'Bsf'; Outlook Stable GBP1.9m Class D (XS0294603708) upgraded to 'BBsf' from 'Bsf'; Outlook Stable GBP3.8m Class E (XS0294604185) upgraded to 'BBsf' from 'CCCsf'; Outlook Stable GBP4.2m Class F (XS0294604771) upgraded to 'Bsf' from 'CCsf'; Outlook Stable GBP8.4m Class G (XS0294607287) upgraded to 'Bsf' from 'CCsf'; Outlook Stable GBP9.4m Class H (XS0294608335) upgraded to 'Bsf' from 'CCsf'; Outlook Stable The previously distressed ratings on the class E to H notes reflected the expected losses from the work out of the GBP285.5m Devonshire Square loan - a view which was driven by the deteriorating income profile of the assets with close to half of in place rent expiring in 2014 and a 2010 valuation at over 100% loan-to-value ratio that showed little sponsor equity left. The loan's 2011 restructure, and implementation of a business plan, was clearly successful with an asset sale subsequently achieved at a level which allowed full repayment of the securitised loan. The modified pro rata distribution of sale proceeds, 80% of which was allocated to class A, significantly improved the credit quality of all note classes as evidenced by the upgrades. The larger of the two remaining loans, the GBP158.4m Access Self Storage loan, makes up 85% of the remaining pool. The loan is secured by 30 self-storage facilities, 86% of which are located in Greater London (by market value), which meet interest costs from revenues derived from the operating business. Income generation has been robust with the portfolio enjoying positive year-on-year growth for both occupancy and net operating income since 2009. This is attributed to the high proportion of London assets, which not only benefit from the housing market churn, like the wider storage centre market, but also have greater access to customers with longer-term storage needs due to a general lack of residential storage space. The asset performance to date provides some confidence that full repayment will be achieved, particularly in light of the strong cash flow and six-year tail period until bond maturity which would assist with any necessary deleveraging. However, this confidence is tempered somewhat by the operating nature of the assets, for which detailed financial reports are not available to Fitch, and the relatively unknown appetite for both lenders and investors for this asset class. The other remaining loan, the GBP26.9m Nextra Portfolio UK loan, is secured by two office properties located in Rickmansworth and Watford. Both assets are let to single tenants with a combined weighted average lease term of 8.07 years providing good continuity of income. The properties are located in a secondary area, which has seen yields widen significantly to that of prime in recent years. However, Fitch estimates that sufficient equity remains to avoid any losses. Fitch will continue to monitor the performance of the transaction. A performance update will be made available shortly on the agency's website, 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 04 April 2012 and 'Global Structured Finance Rating Criteria', dated 6 June 2012, is available at www.fitchratings.com. Applicable Criteria and Related Research: EMEA CMBS Rating Criteria Global Structured Finance Rating Criteria
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