RPT-Fitch upgrades GK MLOX3 class C notes to 'BBsf'
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Sept 12 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has upgraded GK MLOX3's class C notes and affirmed the class D notes, all due June 2015. The transaction is a Japanese multi-borrower type CMBS securitisation. The rating actions are as follows: JPY1.7bn* class C notes upgraded to 'BBsf''from 'Bsf''; Outlook Stable JPY1.78bn* class D notes affirmed at 'CCsf''; Recovery Estimate revised to 45% from 35% *as of 11 September 2013
Key Rating Drivers
The upgrade of the class C notes reflects a substantial principal repayment of the underlying loan and Fitch's view that full redemption of the notes prior to the legal final maturity is more likely than it was a year ago.
Since the previous rating action in September 2012, three of nine properties backing the remaining defaulted loan have been sold at higher values than Fitch had expected. All of these contributed to a substantial repayment of the transaction, with class B being fully redeemed in February 2013. Fitch believes most of the remaining properties are likely to be sold within a year and expects the associated sale proceeds to be sufficient to repay the class C notes in full.
Fitch has revised downwards its net cash flow estimates for two out of the six remaining collateral properties, reflecting the collateral properties' recent weaker-than-expected performance. However, this has been more than offset by the repayment so far.
The affirmation of the class D notes reflects Fitch's view that principal loss remains probable for this class.
An unexpected delay in workout activities, which could push back the full redemption of the class C notes closer to their legal final maturity, may result in negative rating action on the notes.
The rating of the class D notes is sensitive to the sales values of the remaining properties, with negative rating action likely as legal final maturity approaches.
Fitch assigned ratings to this transaction in September 2007. The transaction was initially a securitisation of five loans backed by 25 property trust beneficiary interests. It is currently backed by one defaulted loan, which in turn is backed by six properties.
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