RPT-Fitch downgrades Prominent 2

Mon Feb 3, 2014 8:21am EST

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Feb 3 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has downgraded Prominent CMBS Conduit No. 2 Limited's (Prominent 2) class A, B and C notes due 2019 and affirmed the class D notes, as follows:

GBP120.3m Class A (XS0303848229) downgraded to 'Dsf' from 'Csf'; Recovery Estimate (RE) RE100%

GBP0m Class B (XS0303848815) downgraded to 'Dsf' from 'Csf'; RE0%

GBP0m Class C (XS0303849201) downgraded to 'Dsf' from 'Csf'; RE0%

GBP0m Class D (XS0303849896) affirmed at 'Dsf'; RE0%

KEY RATING DRIVERS

The rating actions reflect the loss allocation from the GBP90.9m Ambassador loan workout and the full repayment of the GBP97.5m Lavancino loan.

In January 2014, only GBP120.3m of class A notes remained outstanding, matching the securitised balance of the sole remaining loan, Colombina. The class B to F notes had been written off due to losses from the defaulted Cavendish, Roade One and Ambassador loans. The senior notes also suffered a minor loss (1.3% of the original balance), driving the downgrade to 'Dsf'.

Colombina is secured on a single office property (Milbank Tower) located in London's Victoria sub-market. The asset was reportedly 74% occupied in January 2014, with 40 tenants contributing GBP10.3m of gross rent on leases expiring in 3.8 years (weighted average). The loan is scheduled to mature in April 2014.

The loan is hedged via an interest rate swap, which expires three years after loan maturity. Should the swap be broken as a result of a loan event of default, breakage costs would be in excess of GBP17m. Fitch believes that the securitised loan will likely repay in full despite these costs, with the non-rated GBP30.7m B-note (not part of Prominent 2) bearing any losses.

The 'Bsf' net recoveries are in excess of GBP120.3m.

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