TEXT-Fitch affirms Epic (More London);outlook stable

Tue Feb 5, 2013 6:03am EST

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Feb 05 - Fitch Ratings has affirmed Epic (More London) plc's notes as follows:

GBP401.2m class A (XS0251155387) affirmed at 'AAAsf'; Outlooks Stable

GBP60.5m class B (XS0251155544) affirmed at 'AAsf'; Outlook Stable

GBP101.4m class C (XS0251156435) affirmed at 'Asf'; Outlook Stable

GBP18.5m class D (XS0251156781) affirmed at 'Asf'; Outlook Stable

GBP51m class E (XS0251157912) affirmed at 'BBBsf'; Outlook Stable

GBP8.7m class F (XS0251159371) affirmed at 'BBBsf'; Outlook Stable

The affirmation reflects the transaction's continued stable performance. The single loan CMBS is secured by six prime London office properties located on a single estate close to London Bridge and inclues the Mayor of London's office, City Hall. The reported A-note loan-to-value (LTV) ratio stands at 67.9% following a revaluation of the assets in March 2012, indicating an increase in value of 4.5% since the March 2011 valuation.

The reported debt service coverage ratio increased to 1.37x in Q412, up from 1.33x at the time of Fitch's last rating action in March 2012 largely due to indexed rental increases. Around 30% of rental income is derived from Ernst & Young (unrated), whose lease expires in September 2028. All properties are let on long leases with a weighted-average unexpired lease term of 11.8 years.

Whole loan leverage is reported to be 78%, indicating some scope for an orderly refinancing of the loan at its scheduled maturity date in July 2014. However, the probability of loan default at its maturity is, in Fitch's opinion, not negligible, due to the long dated interest rate swap written on the GBP96.8m junior loan. Nevertheless, the noteholders should be protected from any additional breakage costs due at loan maturity, since the agency understands that these payments would rank junior to the securitised loan.

A performance update report will be available shortly on www.fitchratings.com.

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