OREANDA-NEWS. Fitch Ratings has downgraded Infinity 2007-1 (Soprano)'s commercial mortgage-backed floating rate class A and B notes due 2019 as follows:

EUR342.7m class A (FR0010478420) downgraded to 'BBsf' from 'BBBsf''; Outlook Negative
EUR36m class B (FR0010478438) downgraded to 'CCCsf' at 'Bsf''; Recovery Estimate (RE) 50%
EUR28.1m class C (FR0010478446) affirmed at 'CCsf''; RE 0%
EUR22.5m class D (FR0010478453) affirmed at 'Csf''; RE0%
EUR28.1m class E (FR0010478479) affirmed at 'Csf'; RE0%

The transaction is a securitisation of the monetary rights arising in favour of the protection seller under originally 15 credit default swaps referencing 15 commercial mortgage loans. Six loans now remain, secured by collateral located in Germany (71% by loan balance), France (16%), and Spain (13%).

KEY RATING DRIVERS
The downgrade of the class A and B notes is driven by lower recovery expectations from the largest loan remaining in the pool - the EUR335.4m EHE 1A loan.

Originally secured by 42 mostly retail assets located throughout Germany, the EHE 1A loan was restructured at its originally maturity in October 2011, which allowed a two-year extension to allow the borrower time to begin an orderly sell down of assets to meet repayment hurdles. A failure to meet these hurdles resulted in a transfer to special servicing in July 2013.

Since the transfer to special servicing sales progress has been tracking in line with a January 2013 valuation of the portfolio with 15 assets sold deriving gross proceeds of EUR26m against the valuation of EUR25m. However, a new August 2014 valuation saw the reported value of the remaining assets fall by 27% to EUR185.5m. Fitch expected a certain degree of value decline to occur but not to this magnitude given the sales performance to date and relative stability of portfolio performance metrics compared with similar portfolios.

The remaining collateral is characterised by a high concentration of retail warehouse/clusters and secondary located in-town shopping centres - the latter of which form three of the top five assets by value and face either increased local competition (leading to vacancy) or declining lease profiles, which has dampened our view on recoveries. The re-letting and/or repositioning of these assets would likely be needed to attract investor interest aside from those who operate on an opportunistic basis.

The loan reports an interest cover ratio (ICR) of 2.67x, which belies the level of excess cash available to benefit the senior loan with default interest (which is included in the ICR calculation) and interest on the EUR71.1m junior loan being payable after senior principal. This has allowed EUR3.4m to be swept at the last IPD. It also offers flexibility to the special servicer to implement asset management initiatives which could see a value accretive capital expenditure further improving recovery prospects.

RATING SENSITIVITIES
Any performance deterioration of the portfolio underpinning the EHE 1A loan, lower than expected cash sweep, or sales progress being below reported valuation could lead to negative rating action.

Fitch estimates 'Bsf' principal proceeds of approximately EUR360m.