OREANDA-NEWS. Fitch Ratings has affirmed Cavendish Square Funding plc's notes, as follows:

Class A1 (XS0241540763): affirmed at 'BBBsf'; Outlook Stable
Class A2 (XS0241541571): affirmed at 'BBsf'; Outlook revised to Stable from Negative
Class B (XS0241542033): affirmed at 'Bsf'; Outlook Negative
Class C (XS0241543353): affirmed at 'B-sf'; Outlook Negative

Cavendish Square Funding is a cash arbitrage securitisation of European structured finance assets, mainly mezzanine RMBS, CMBS and commercial ABS assets of speculative-grade quality.

KEY RATING DRIVERS
The affirmation reflects adequate credit enhancement (CE) available to the notes to support the current rating stresses. The class A1 notes have continued amortising, supported by pay-downs mainly from CMBS and RMBS assets in the portfolio, of EUR12.8m and EUR8.7m, respectively, between August 2014 and July 2015. As of the July trustee report the outstanding note balance of the class A1 notes was reduced by roughly EUR30m to 45% of its initial balance

The portfolio is highly concentrated in RMBS assets. As per Fitch's calculations RMBS represent 83.7% of the portfolio, up from 75.4% in August 2014, followed by commercial ABS assets at 5.3%. The rest of the portfolio is made up CMBS (4.4%), structured finance CDO (3.22%), consumer ABS (2.9%) and corporate CDO (0.49%). The vast majority of the portfolio consists of mezzanine assets with an original tranche thickness of less than 10%.

The portfolio also has significant country concentration. The largest country in the portfolio is the UK with 42.3% of the assets, followed by Spain with 26.4%. Exposure to Greece, Portugal and Spain represents 34.5% of the total portfolio, up from 32% in August 2014 as per Fitch's calculations.

Overall the rating distribution of the portfolio has remained stable. Over the past one year, one asset defaulted, taking current defaults to EUR27.4m, slightly above the amount reported in August 2014 of EUR24.3m.

The revised Outlook on the class A2 notes to Stable from Negative reflects the increase in credit enhancement available for the notes.

RATING SENSITIVITIES
In its stress tests Fitch found that reducing the recovery rate by 25% could lead to the downgrade of the class A2 and C notes by one notch. Increasing the default rate by 25% could lead to the downgrade of the class A2 notes by up to two notches, and the class B and C notes by one notch each.

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 Bank of New York Mellon as at 31 July 2015
-Transaction reporting provided by Bank of New York Mellon as at 31 July 2015