OREANDA-NEWS. Fitch Upgrades Zoo ABS IV Plc London Fitch Ratings has upgraded Zoo ABS IV Plc's class B, C, D, E and P notes and affirmed the remaining notes, as follows:

Class A-1A (ISIN XS0298493072): affirmed at 'BBBsf'; Outlook Stable

Class A-1B (ISIN XS0298495523): affirmed at 'BBBsf'; Outlook Stable

Class A-1R (no ISIN): affirmed at 'BBBsf'; Outlook Stable

Class A-2 (ISIN XS0298496505): affirmed at 'BBsf'; Outlook Stable

Class B (ISIN XS0298496927): upgraded to 'BBsf' from 'B+sf'; Outlook Stable

Class C (ISIN XS0298497495): upgraded to 'Bsf' from 'B-sf'; Outlook Stable

Class D (ISIN XS0298498386): upgraded to 'Bsf' from 'CCCsf'; Outlook Stable

Class E (ISIN XS0298498972): upgraded to 'Bsf' from 'CCCsf'; Outlook Stable

Class P (ISIN XS0298626564): upgraded to 'Bsf' from 'B-sf'; Outlook Stable

Zoo ABS IV Plc is a cash arbitrage securitisation of structured finance assets.

KEY RATING DRIVERS

The upgrade of the class B, C, D and E notes reflects an increase in credit enhancement over the last 12 months. The transaction has deleveraged significantly, distributing EUR73.5m of principal proceeds to noteholders over the last year. The deleveraging was largely driven by prepayments in the UK RMBS sector. The transaction also features a turbo principal payment in the interest waterfall, where 20% of the excess spread is diverted to pay down the principal of the class E notes.

A sequential redemption event occurred in May 2016, following the reduction of the aggregate principal balance below 75% of the target par amount. As a consequence, the transaction has switched to sequential amortisation from pro rata amortisation.

The transaction can reinvest unscheduled principal proceeds as long as the coverage and portfolio profile tests are passing or, if failing, maintained or improved after the reinvestment. Over the past 12 months, the manager did not actively reinvest and only EUR10m of unscheduled principal proceeds were used to purchase additional assets. Fitch understood that the manager has no further intention of reinvesting.

The portfolio quality has been stable. The weighted average ratings for the current portfolio are 'BBB-'/'BB+'. The current defaults are stable and represent approximatively EUR2.5m. The portfolio is heavily concentrated in RMBS, which represents approximatively 78% of the performing portfolio. Exposure to countries with a Country Ceiling below 'AAA' makes up 55.4% of the performing portfolio, primarily composed of Italy, Spain and Portugal.

The class P combination notes' ratings reflect the ratings of the class C component classes.

RATING SENSITIVITIES

A 25% increase in the asset default probability or a 25% reduction in expected recovery rates would not lead to a downgrade for the rated notes.

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.

The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally Recognised Statistical Rating Organisations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant Fitch groups and/or other rating agencies to assess the asset portfolio information.

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.

-Loan-by-loan data provided by the collateral administrator as at 30 May 2016

-Transaction reporting provided by the collateral administrator as at 30 May 2016