OREANDA-NEWS. Fitch Ratings has affirmed Logistics UK 2015 plc's floating-rate notes due 2025 as follows:

GBP312.6m class A (ISIN XS1255426543) affirmed at 'AAAsf'; Outlook Stable

GBP67.5m class B (ISIN XS1255427194) affirmed at 'AAsf'; Outlook Stable

GBP67.5m class C (ISIN XS1255427350) affirmed at 'Asf'; Outlook Stable

GBP60.8m class D (ISIN XS1255427608) affirmed at 'BBBsf'; Outlook Stable

GBP76m class E (ISIN XS1255428754) affirmed at 'BB-sf'; Outlook Stable

GBP61.8m class F (ISIN XS1259063037) affirmed at 'Bsf'; Outlook Stable

The transaction is a securitisation of 95% of a single GBP680m commercial real estate loan advanced to entities related to Blackstone Real Estate Partners by Goldman Sachs Bank USA. The loan is backed by a portfolio of 42 logistics assets located throughout the UK (no assets have been sold to date). Fitch considers the overall standard of the collateral as near prime. Loan maturity is scheduled for August 2018, although it can be extended until 2020, subject to meeting performance and hedging thresholds. The bonds will mature in 2025.

KEY RATING DRIVERS

The affirmation reflects the overall stable performance of the portfolio as well as the wider logistic real estate markets since closing in August 2015. There has been tenant turnover as some occupiers exercised break options, but the high quality and favourable locations of the majority of the assets means that vacant space is re-let swiftly. One previously vacant property in Dagenham has reportedly been let to the Coca Cola Company (A+/Negative) on a five-year lease. A number of lease extensions also contribute to the high rate of occupancy.

One tenant has defaulted on its lease. In May, Polestar (accounting for 5.8% of the rent) entered administration. The facility in Sheffield is more specialist than most others, and may take some time to re-let. Fitch has assumed a void of three years in its analysis.

In February, the issuer announced that the office component in the Fort Dunlop asset had suffered fire damage and was subsequently vacated by its tenant. The majority of the property comprises warehouse space and remains unaffected. Assuming insurance will cover repair costs and loss of rental income, Fitch would expect that the property can be fully restored within a year. Only 0.6% of total rent is affected, which is negligible in the analysis.

RATING SENSITIVITIES

Fitch expects a full repayment in a 'Bsf' scenario. Should the UK enter recession, this may provoke a downturn in the UK logistics market and lead to 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 Wells Fargo as at end-May 2016