OREANDA-NEWS. Fitch Ratings has downgraded Fornax (Eclipse 2006-2) B. V.'s class E notes, revised the Outlook on the class D notes and lowered the Recovery Estimate (RE) on the class F notes as follows:

EUR8.9m class D (XS0267554920) affirmed at 'BBBsf'; Outlook changed to Stable from Negative

EUR24.8m class E (XS0267555570) downgraded to 'CCCsf' from 'B-sf'; RE95%

EUR16.8m class F (XS0267555737) affirmed at 'CCsf'; RE revised to 0% from 50%

EUR6.7m class G (XS0267556032) affirmed at 'Dsf'; RE 0%

The transaction is a securitisation of initially 19 (now three) commercial real estate (CRE) loans originated by Barclays Bank PLC. The remaining loans are the EUR39.9m Cassina Plaza loan, the EUR8m ATU loan and the EUR9.3m Kingbu loan. All of the loans are defaulted, with note principal distributed on a sequential pay-down basis.

KEY RATING DRIVERS

The Outlook revision to Stable for the class D notes reflects the significantly lower leverage of this class, which is now the most senior tranche of notes, after repayment in full of the Bielefeld /Berlin loan. While this was expected, this is a credit positive in an investment grade scenario. A resolution of any of the loans currently outstanding should be sufficient for the full redemption of this class, which Fitch considers as probable prior to bond maturity in February 2019.

Redemption of the class E notes will require settlement of all three loans however, the probability of which is receding in line with time remaining to maturity. Neither a debt and equity sale of the Cassina borrower nor a sale of the ATU portfolio have materialised since Fitch's last rating action, highlighting the difficulty of implementing proposed resolutions in a swift fashion. This is reflected in the 'CCCsf' rating of the class E notes.

For Cassina, the servicer is in negotiations over a proposed asset sale (comprising four neighbouring offices in an outlying suburb of Milan). As recoveries are likely to be a small fraction of the last published valuation of EUR55.6m, and with the lease break of the key tenant approaching, Fitch has downgraded the class E notes and revised the RE for the class F notes.

The potential purchaser of the portfolio of eight car repair shops in Austria securing the EUR8m ATU loan has pulled out, reportedly on concerns over the tenant (ATU). The servicer has, however, reported investor interest in selected properties at prices roughly in line with valuations.

The EUR9.3m Kingbu loan is secured by a portfolio of fast-food restaurants (branded Burger King) spread across Germany. A refinancing is currently being negotiated, supporting Fitch's view that the borrower retains equity in the portfolio and further supporting the Stable Outlook for class D notes' rating.

RATING SENSITIVITIES

Given the approach of legal final maturity, the key rating sensitivity will be the speed at which recoveries from the loans can be generated, and at what discount to valuation, if any. More evidence of delays following through on resolution proposals would negatively affect the rating of the class E notes. On the other hand, a higher-than-expected recovery amount for Cassina could lead to upward revision of the class F notes' RE.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch 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 affected the rating 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.

-Loan-by-loan data provided by the servicer as at July 2016

-Transaction reporting provided by the servicer as at July 2016