OREANDA-NEWS. Fitch Ratings has affirmed Euromax III MBS Ltd as follows:

EUR34m Class A-1 (XS0158773324): affirmed at 'CCCsf'
EUR6m Class A-2 (XS0158774991): affirmed at 'CCsf'
EUR12m Class B (XS0158775022): affirmed at 'Csf'

Euromax III MBS Ltd is a cash arbitrage securitisation of structured finance assets.

KEY RATING DRIVERS

The affirmation reflects the transaction's stable performance over the last 12 months. The class A-1 notes have amortised by EUR4.6m, resulting in an increase in credit enhancement of 1.32%. Pay down of the portfolio, however, has been slow with only EUR3.5m received and 57% received from one asset paying down in full. The remaining amortisation was provided by principal collections in the last 12 months, held in cash, as well as interest diverted from the class C and D notes.

The transaction is past its expected maturity of December 2014 and as a result step up coupons are in effect. The spread on the class A-1 has increased to 0.75% from 0.4%, the class A-2 to 0.75% from 0.55% and the class B to 1.5% from 0.9%. Due to the increase in the cost of liabilities the excess spread generated by the transaction has been reduced.

However, Fitch calculates that, based on the current weighted average spread and senior fees paid in the past 12 months, interest collection is currently sufficient to pay senior fees and interest on the class A-1, A-2 and B notes. The class B notes have the ability to defer interest; however, a missed interest payment on the class A-1 or A-2 notes would be an event of default for the transaction. Given the concentration of the portfolio, with the two largest assets representing a combined 22.5% of the portfolio and rated 'CCC' and 'CC', interest coverage is sensitive to future defaults.

Within the portfolio 20.4% have been upgraded, compared with 5.3% downgraded. Most significantly the proportion of 'A' rated assets has increased to 13.5% from 1.4% with the upgrade of two assets.
Fifty-five per cent of the portfolio is, however, rated 'CCC' or below and there are two assets on Negative Outlook. RMBS assets represent 76% of the portfolio compared with 72% a year ago, with a subsequent 4% fall in CMBS assets.

RATING SENSITIVITIES
Fitch tested the impact on the ratings of bringing the maturity of the assets in the portfolio to their legal maturity and found that this would lead to a downgrade of the class A-1 notes.

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.

The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally Recognised Statistical Rating Organisations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant Fitch groups and/or other rating agencies to assess the asset portfolio information.

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 BNY Mellon 10 June 2015
- Transaction reporting provided by BNY Mellon 10 June 2015