OREANDA-NEWS. Fitch Ratings has affirmed Intu Metrocentre Finance plc's GBP485m fixed rate notes due November 2028 (ISIN: XS0994934965) at 'Asf' with a Stable Outlook.

The transaction is the securitisation of a GBP485m interest-only commercial mortgage loan secured by Intu Metrocentre, a super-regional shopping centre located 30 minutes from central Newcastle, as well as an adjacent retail park.

KEY RATING DRIVERS
The affirmation reflects the transaction's stable performance. Since Fitch's last rating action, the loan-to-value ratio (LTV) has decreased to 52.4% from 52.8% as a result of a revaluation of the collateral. Passing rent has slightly decreased to GBP49.5m from GBP52.1m due to the combined effect of rent reviews, two tenants going into administration and the temporary closure of the food court during its refurbishment (Qube 2 project). As a result, the interest coverage ratio (ICR) has decreased to 2.12x from 2.19x, which compares favourably to a cash trap trigger of 1.40x and an ICR default covenant of 1.25x.

The properties benefit from a long income stream with a weighted average lease length (WALL) to break of 7.3 years, which combined with solid anchor tenants (House of Fraser, Debenhams, Next and Primark amongst others) largely mitigates default risk over the eight-year loan term. Across the shopping centre, the top 10 tenants account for 26% of the passing rent on a WALL to break of 15.6 years, which provides a strong base to attract a solid footfall and maintain a high occupancy. Given the quality of the asset and its dominant position and despite the absence of amortisation, the agency expects the borrower to have good access to financing at maturity.

RATING SENSITIVITIES
A shift away from shopping centres towards in town or online retail or an increase in vacancy could, over time, have a detrimental effect on the performance of the collateral and prompt negative rating action. However, Fitch would expect the sponsor to seek to mitigate this in order to protect its considerable equity in its assets.

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.

Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

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.
- Transaction reporting provided by Intu Properties plc as at December 2014.