OREANDA-NEWS. Fitch Ratings has revised the Outlook on Talisman 7 plc's class B and C notes to Stable from Negative and affirmed all ratings as follows:

EUR66m class B: affirmed at 'BBsf'; Outlook revised to Stable from Negative
EUR84.2m class C: affirmed at 'Bsf'; Outlook revised to Stable from Negative
EUR66.5m class D: affirmed at 'CCCsf'; Recovery estimate (RE) 30%
EUR47.1m class E: affirmed at 'CCsf'; RE 0%
EUR68.9m class F: affirmed at 'Csf'; RE 0%
EUR44.8m class G: not rated
EUR10.7m class H: not rated
EUR12.5m class I: not rated
EUR0m class J: not rated

This transaction was originally a securitisation of 10 commercial mortgage loans originated by ABN AMRO Bank NV with a cumulative balance of EUR1,826m at closing. At end-June 2015, six loans, all in special servicing, backed the notes. The loans themselves were backed by 56 properties located in Germany with a current market value (MV) of EUR221.9m.

KEY RATING DRIVERS
Over the last 12 months, the class A notes (EUR94.4m) have been paid in full and the class B notes have amortised to EUR66m from EUR87.3m through asset sales. The individual performance of the properties backing the portfolio remains largely unchanged. The successful sales efforts, along with the sequential pay-down, are the reason for today's Outlook revision. This, combined with the upcoming final legal maturity in April 2017, underpins the affirmation of the ratings.

The Mozart loan asset sale (largest loan in the portfolio, EUR190.4m part of a EUR360.5m whole loan) has progressed with 17 asset sales over the last one year, leaving 17 mixed-use properties located around Germany in the portfolio. Fitch understands from the issuer that sale agreements for a further five assets have been signed. The sales pace, combined with sale prices on average being close to the assets' respective valuations, partially mitigates the transaction's increasing leverage. The transaction's loan-to-value has increased to 167.1% from 121% over the last 12 months due to properties being sold below the respective original allocated loan amounts.

The Eschborn office asset securing the Brahms loan was sold for EUR23.4m in January 2014. The proceeds were distributed to noteholders on the April 2014 interest payment date (IPD). The Brahms borrower is going through insolvency proceedings and minor further recoveries (around EUR30k) are expected. Nevertheless when the loan is fully resolved a loss of around EUR20m will be allocated to the class H and I notes.

With all loans in special servicing and undergoing different stages of resolution, expected recoveries are highly dependent on the short-term market conditions for secondary and tertiary real estate in Germany. Although investor interest has returned to this market sector after years of subdued demand, the achievable prices are still well below those seen in 2005-2007, when these loans were originated. This level of stress is reflected by the transaction's below-investment grade ratings. The transaction benefits from a further EUR68m credit enhancement provided by the class G to I notes.

RATING SENSITIVITIES
Lower-than-expected recoveries in the remaining notes or an adverse turn in market sentiment for secondary and tertiary assets in Germany could prompt negative rating actions on the notes.

Fitch estimates 'Bsf' collateral proceeds at EUR180m.

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.
-Loan-by-loan data provided by servicer at end-April 2015
-Transaction reporting provided by servicer at end-April 2015.