OREANDA-NEWS. Fitch Ratings has downgraded Tesco Property Finance No1. Plc's (TPFN1), TPFN2, TPFN3, TPFN4 and TPFN6, and Delamare Finance Plc and DECO 12 - UK 4 p.l.c.'s (DECO 12) class A1, A2 and B notes as follows:

TPFN1
GBP404.4m class A (XS0425412227) due July 2039: downgraded to 'BB+' from 'BBB-sf'/Outlook Negative

TPFN2
GBP522.4m class A (XS0347919028) due October 2039: downgraded to 'BB+' from 'BBB-sf'/Outlook Negative

TPFN3
GBP944.3m class A (XS0512401976) due April 2040: downgraded to 'BB+' from 'BBB-sf'/Outlook Negative

TPFN4
GBP677.3m class A (XS0588909879) due October 2040: downgraded to 'BB+' from 'BBB-sf'/Outlook Negative

TPFN6
GBP492.6m class A (XS0883200262) due July 2044: downgraded to 'BB+' from 'BBB-sf'/Outlook Negative

Delamare Finance Plc
GBP382.5m class A (XS0190042522) due February 2029: downgraded to 'BB+' from 'BBB-sf'/Outlook Negative

DECO 12
GBP174.1m class A1 (XS0289644121) downgraded to 'BB+' from 'BBB-sf'/Outlook Negative
GBP113.6m class A2 (XS0289644477) downgraded to 'BB+' from 'BBB-sf'/Outlook Negative
GBP34.6m class B (XS0289644550) downgraded to 'BB+' from 'BBB-sf'/Outlook Negative

KEY RATING DRIVERS
The rating actions follow similar rating actions on Tesco Plc, to which the TPF and Delamare transactions are credit-linked (see "Fitch Downgrades Tesco to 'BB+'; Negative Outlook" dated 24 October 2015 at www.fitchratings.com). DECO 12's ratings are credit-capped at Tesco's long-term rating, as a Tesco loan comprises 96.9% of the loan collateral.

Each of the affected TPF/Delamare note classes are scheduled to fully amortise at their respective maturity. These transactions are securitisations of rental income derived from Tesco-occupied retail stores or distribution centres, with the exception of 21 retail units in the Yardley development asset in TPFN4, which are leased to third-party retailers. However, the structure allows for an underpinning mechanism consisting of a rent reserve and a subordinated loan backed by Tesco, ultimately transferring the risk of third-party rental income to Tesco.

All assets were sold by Tesco and leased back to the company on long-term leases, all matching the term to the notes' maturity. The properties are all let to fully-owned subsidiaries of Tesco. The obligations of all tenants are fully guaranteed by Tesco.

DECO 12 was originally the securitisation of ten commercial mortgage loans. In April 2015, the Tesco loan comprised 96.9% of the transaction (the only other remaining loan is cash-collateralised). While the Tesco loan is not fully amortising, debt service on the notes, including ultimate principal repayment, depends heavily on the retailer's performance and its effect on the 16 securitised properties.

RATING SENSITIVITIES
Any changes to Tesco's Issuer Default Rating or Outlook would trigger a corresponding change in the credit-linked CMBS transactions. Any downward movement will be mirrored by the senior DECO12 notes.