OREANDA-NEWS. Fitch Ratings has upgraded DECO 2014 - GONDOLA S. r.l.'s class B And C floating-rate notes due 2026 and affirmed the other tranches as follows:

EUR53.7m Class A (IT0005030777) affirmed at 'A+sf'; Outlook Stable

EUR65m Class B (IT0005030793) upgraded to 'A+sf' from 'Asf'; Outlook Stable

EUR30.5m Class C (IT0005030801) upgraded to 'Asf' from 'A-sf'; Outlook Stable

EUR52m Class D (IT0005030827) affirmed at 'BBB-sf'; Outlook Stable

EUR21.9m Class E (IT0005030835) affirmed at 'BBsf'; Outlook Stable

DECO 2014 - GONDOLA S. R.L. closed in 2014 and was originally a securitisation of three commercial mortgage loans with an original balance of EUR355m. The loans were granted by Deutsche Bank AG (A-/Stable) to two Italian closed-end real estate funds and two cross-collateralised Italian limited-liability companies to acquire/ refinance 13 logistics centres, two shopping-centres, two office buildings and one hotel. All assets are located in Italy and ultimately owned by the borrowers' common sponsor, Blackstone.

KEY RATING DRIVERS

The upgrade reflects the full prepayment of the EUR80.1m Gateway loan and partial prepayment of the Delphine loan upon the sale of the NHOW hotel. The issuer used the proceeds to pay off the notes' principal on a sequential basis, improving the available credit enhancement of the senior notes. Despite de-leveraging and stable collateral performance, the junior tranches have been affirmed due to risks arising from (i) the secondary quality property comprising part of the collateral; (ii) re-letting the larger units; and (iii) challenges in working out Italian loans. Fitch applies a 'Asf' category rating cap to reflect those challenges.

Following the sale of the NHOW hotel (and the repayment of EUR29.7m), the EUR96.2m Delphine loan is now secured on two office buildings located in Milan and Rome. Telecom Italia (BBB-/Stable) accounts for 63.9% of gross rent, on a lease with a break option in 2.3 years.

Milan tenant RCS (accounting for 34.5% of the rent) has vacated part of the Delphine collateral since the last rating action in July 2015, as expected. RCS remain committed to the remaining space for a minimum of 6.2 years (to break option). The vacant space is being refurbished while negotiations with potential tenants are ongoing.

The EUR127.8m Mazer loan is secured on 13 logistics assets in northern Italy. There have been no asset disposals since closing. The top three tenants account for 71% of passing rent, with the largest occupier CEVA making up 50%. Consistent with the property type, the remaining lease term to the break option is short (ranging from 1.6 years to 4.8 years) and vacancy has remained stable at around 9.2%. As with the Delphine loan, the Mazer loan is due in February 2019.

RATING SENSITIVITIES

Fitch expects a full repayment of both loans in a 'Bsf' scenario.

A downturn in the Italian office and industrial sectors could result in downgrades.

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 reporting provided by Securitisation Services S. p.A. as at end-May 2016