OREANDA-NEWS. Fitch Ratings has upgraded Zoo ABS IV Plc's class E notes and affirmed the others, as follows:

Class A-1A (ISIN XS0298493072): affirmed at 'BBBsf'; Outlook Stable
Class A-1B (ISIN XS0298495523): affirmed at 'BBBsf'; Outlook Stable
Class A-1R (no ISIN): affirmed at 'BBBsf'; Outlook Stable
Class A-2 (ISIN XS0298496505): affirmed at 'BBsf'; Outlook Stable
Class B (ISIN XS0298496927): affirmed at 'B+sf'; Outlook Stable
Class C (ISIN XS0298497495): affirmed at 'B-sf'; Outlook Stable
Class D (ISIN XS0298498386): affirmed at 'CCCsf'
Class E (ISIN XS0298498972): upgraded to 'CCCsf' from 'CCsf'
Class P (ISIN XS0298626564): affirmed at 'B-sf'; Outlook Stable

Zoo ABS IV Plc is a cash arbitrage securitisation of structured finance assets.

KEY RATING DRIVERS
The affirmations reflect the stable asset performance and slightly increased credit enhancement (CE) since the last review. Although the notes have been redeemed by EUR17m, this only had a minor impact on CE due to the pro rata amortisation on all notes apart from the equity, which will continue unless the coverage tests are breached or the outstanding balance drops below EUR375m. The minor improvement in CE is due to EUR1.9m recoveries from the defaulted assets.

The upgrade of the class E notes is due to the turbo principal payment in the interest waterfall, 20% of the excess spread will be diverted to pay down the principal. Fitch expects this feature will continue as the junior overcollateralisation (OC) test is passing with 3% cushion and it is the largest cushion on this test.

The transaction can reinvest the unscheduled principal proceeds as long as the coverage and portfolio profile tests are passing or if the test failed, the test results are maintained or improved after the reinvestment. Over the past 12 months, EUR64.4m principal was received from amortisation and EUR3.6m was from sales. A total EUR51.5m assets were purchased of which EUR38.3m were RMBS assets.

The portfolio quality has been stable. The weighted average ratings for the current portfolio are 'BBB-'/'BB+'. The current defaults have decreased to EUR2.5m from EUR5.8m since the last review. Assets with investment grade ratings make up 77% of the portfolio and approximately 3% of the portfolio is in the 'CCC' and below bucket. Over the past year, RMBS assets have amortised more slowly than CMBS and corporate CDOs assets. As a result, the proportion of RMBS has increased further to 74.3% from 66.1%. Exposure to countries with a Country Ceiling below 'AAA' makes up 48.4% of the portfolio, primarily composed of Italy, Spain and Portugal.

The weighted average spread has remained at 1.4%. All coverage tests are passing. The weighted average life test is failing but has improved compared with last review, decreasing to 7.9 from 8.6 years with a trigger at 6.0 years.

The class P combination notes' ratings reflect the ratings of the class C component classes.

RATING SENSITIVITIES
Applying a 1.25x default rate multiplier to all assets in the portfolio would result in a downgrade of up to two notches and applying a 0.75x recovery rate multiplier to all assets in the portfolio would not make any impact.

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 pools and the transactions. There were no findings that were material to this analysis.

Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transaction's initial closing. The subsequent performance of the transactions 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 Deutsche Bank as at 29 June 2015
-Transaction reporting provided by Deutsche Bank as at 29 June 2015