Nov 26 - Fitch Ratings has affirmed Titan Europe 2006-3 plc's class A, B, C
and D, as follows:
EUR256.4m Class A (XS0257767631) affirmed at 'BBsf'; Outlook Stable
EUR237.5m Class B (XS0257768522) affirmed at 'CCsf'; Recovery Estimate (RE) 35%
EUR50.2m Class C (XS0257769090) affirmed at 'Csf'; RE0%
EUR13.6m Class D (XS0257769769) affirmed at 'Dsf'; RE0%
The affirmation reflects the ongoing poor performance of a number of loans
within the transaction, as anticipated by Fitch at its last full rating action
in December 2011. Over the last 12 months, EUR155m of losses from the SQY Ouest,
the Weserstrasse loan and the AS Watson loan lead to full write-down of the
classes E and F notes and a partial write-down of the Class D. The magnitude of
these loses were already incorporated in Fitch's December 2011 rating actions.
As at the last review, the majority of loans within the pool remain distressed.
Nine loans remain outstanding, five of which report loan to value (LTV) ratios
well in excess of 100%, while six are in payment default. In Fitch's analysis,
the largest expected loss is attributable to the EUR92.9m Quelle Nurnberg senior
loan (part of a EUR102.6m whole loan). Given the facility is currently accruing
unpaid interest (EUR15.9m as of the last interest payment date) and the
collateral quality is secondary in nature, Fitch estimates little principal
recoveries for this loan.
The portfolio is dominated by the EUR232m Target loan, accounting for 42% of the
transaction's outstanding balance. Its collateral is heavily exposed to Thales
(rated 'BBB+'/Outlook Negative), the French technology and defence company,
which accounts for 71% of total passing rent. The loan is secured by 15 office
assets around France, the majority of which are located out of town. Thales has
recently declared its intention to vacate the largest asset in the pool, a
48,000 sqm office property located in Colombes, Greater Paris, representing 25%
by market value of all assets securing the loan. The lease has a break option at
the end of 2014.
While the company's current strategy is to optimise its use of sites given
current economic conditions, the size of the assets let to Thales (all but one
in excess of 25,000sq m), makes it unlikely that the company will depart from
all of these assets concurrently at the upcoming break options over the next 2-3
years. In Fitch's view, the loan remains of good credit quality and will likely
redeem, consequently repaying a large portion of the Class A notes.
A restructuring agreement was recently approved with respect to the Rivierestate
loan (8%). The loan, which failed to pay at its maturity in April 2011, has been
assigned to 'standstill' until July 2013, with the intention of liquidating the
underlying collateral. The multi-tenanted office property securing the loan is
located in a residential area approximately 2km to the South East of Amsterdam
centre, it is 50% vacant and the weighted average lease to break is just under 2
years. Fitch expects this loan to make a significant loss.
The Kurhaus Hotel loan (8%) matures in January 2013, and is secured by a 5 star
hotel in Scheveningen, a seaside resort of The Hague, the Netherlands. Turnover
has been severely impacted by the economic crises, resulting in the hotel
operating company failing to make its full interest payment as of the July 2012
interest payment date. As a result, the loan is now in default. Given interest
payments are not likely to recommence, a liquidation of the asset, inevitably
leading to distressed recovery proceeds, appears the only likely solution.
The Monnet (12%), Sydrall Business Park (6.4%) and Twin Squares (Prater) loans
(2.4%) remain outstanding having failed to repay at their maturities over the
last 22 months. While Fitch anticipates losses for all three loans, the Monnet
and Twin Squares (Prater) loans are in a particularly precarious position. The
Monnet loan (secured by eight office properties in Belgium and Germany) has not
serviced any of its interest over the last four quarters (with this outstanding
senior liability currently equal to EUR9.2m), while the sole tenant in the
office property located in the Netherlands securing the Twin Squares loan has
acquired alternative premises, and stated its intention to vacate the building
in the next 12 months.
The two smallest loans in the pool, the Stage (1.7%) and Matrix data loans
(1.8%), are expected to repay without loss at their maturities in April and July
A performance update will be available 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
Applicable Criteria and Related Research:
EMEA CMBS Rating Criteria
Global Structured Finance Rating Criteria