OREANDA-NEWS. Fitch Ratings has upgraded Taurus CMBS (Pan-Europe) 2007-1 Limited class A1 notes due 2020 and affirmed the others as follows:

EUR83.1m class A1 (XS0305732181) upgraded to 'CCsf' from 'Dsf'; Recovery Estimate (RE) 100%

EUR10.9m class A2 (XS0309194248) affirmed at 'CCsf'; RE100%

EUR16m class B (XS0305744608) affirmed at 'CCsf'; RE100%

EUR23.3m class C (XS0305745597) affirmed at 'CCsf'; RE90%

EUR18.4m class D (XS0305746215) affirmed at 'Csf'; RE0%

EUR0.5m class E (XS0309195567) affirmed at 'Dsf'; RE0%

EUR0m class F (XS0309195997) affirmed at 'Dsf'; RE0%

Taurus CMBS (Pan-Europe) 2007-1 was originally the securitisation of 13 loans originated by Merrill Lynch. The loans comprised both tranched and whole facilities which were secured on collateral located in Switzerland, France and Germany. Two loans now remain.

KEY RATING DRIVERS

Since the last rating action in July 2015, the WPC loan has been resolved at a loss of EUR1.9m (already allocated to the class E notes). By recently approving a safeguard plan for the Fishman JEC loan, the French courts' decision has enabled the borrower to recommence making interest payments, clearing an interest shortfall on the class A1 notes. As this class of notes is re-performing, the rating has been upgraded from 'Dsf', although Fitch still expects a default by bond maturity. The smaller Hutley loan is expected to repay very shortly.

The EUR24.9 Hutley loan is due on 30 July 2016 after using its extension options, the last of which had been granted on condition the borrower deleverage (this resulted in a repayment of EUR3.1m). This occurred last year, and together with meaningful cash sweep this helped to bring the loan to value ratio (LTV) to 58.4% from 69.0% at the time of the last rating action. Occupancy slightly improved and now stands at 89.0% from 85.7% last year with the top four tenants accounting for almost 50% of the rent. Fitch expects the loan to be repaid shortly.

The EUR127.5m Fishman JEC loan entered safeguard proceedings in July 2014, two months after becoming specially serviced. While an immediate payment moratorium led to non-payment of loan interest, the loan was legally not considered to be in default, and penalty interest was deemed not to be accruing. Corresponding liquidity facility (LF) drawings therefore only covered ordinary interest payment, not enough to allow the issuer by May 2015 to cover its far higher legal expenses related to the safeguard process. The class A1 notes therefore defaulted at that time.

In September 2015, a safeguard plan was agreed, setting out a formal plan which effectively rescheduled debt service. Resumption in interest payments has led to repayment of the LF drawings and allowed the issuer to clear its accrued and unpaid senior interest, but the final instalment of loan principal (58% of the balance) is now timed to fall 10 months after bond maturity in February 2020. Fitch cannot entirely discount the possibility the borrower accelerates asset sales ahead of the plan, but we consider the chances of bond repayment by maturity as slim.

Fishman JEC is expected to continue to pay interest, which whether before or after repayment of Hutley, should be adequate to meet issuer mandatory expenses (including A1 interest). Fishman JEC recovery prospects alongside the expected repayment of Hutley support strong REs down to the class C notes.

RATING SENSITIVITIES

Any delays of the Fishman JEC disposal strategy could lead to a downward revision of the class C RE and - particularly if it is accompanied by a breach in the terms of the safeguard plan - a downgrade of all the notes in the event potentially higher legal expenses led to issuer default.

Fitch estimates 'Bsf' recoveries of EUR129m.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION

The information below was used in the analysis.

- Transaction reports dated 04 May 2016 and provided by Wells Fargo

- Deal summary report dated 11 May 2016 and provided by Capita Asset Services Ireland Ltd

- Asset surveillance report dated 25 May 2016 provided by Capita Asset Services Ireland Ltd