OREANDA-NEWS. Fitch Ratings has affirmed Equinox (Eclipse 2006-1) plc's notes as follows:

Class A (XS0259279585) affirmed at 'CCCsf'; Recovery Estimate (RE) 90%
Class B (XS0259280088) affirmed at 'Dsf'; RE0%
Class C (XS0259280161 affirmed at 'Dsf'; RE0%
Class D (XS0259280591) affirmed at 'Dsf'; RE0%
Class E (XS0259280674) affirmed at 'Dsf'; RE0%

The transaction is a securitisation of 13 UK commercial mortgage-backed loans, 12 of which were originated by Barclays Bank PLC, and one which was acquired from Royal Bank of Scotland PLC. There are currently three loans remaining in the portfolio. One is in special servicing and the remainder are performing.

KEY RATING DRIVERS
The ratings and RE for the class A notes depend on the outlook for the Ashbourne Portfolio Priority A (APPA) loan, of which GBP71.6m is securitised in this transaction. In line with the negative outlook Fitch's Global Infrastructure Group has assigned to the UK nursing home sector, the loan is suffering the effect of weakened operating condition, as reflected by the weak asset performance.

The APPA loan is a participation in the most senior tranche of a complex GBP328m package of debt secured by a portfolio of illiquid UK nursing homes (another participation is held by Hercules -Eclipse 2006-4. Equinox is due 2018, but the entire tranche held by both issuers may face further debt extension given the protracted liquidation process that is underway.

Following nursing home operator Southern Cross's bankruptcy in 2011, two new nursing home operators were installed to run the portfolio under a management agreement, allowing the defaulted mortgage debt to be restructured. This involved, among other things, a short loan extension, a bundling of unpaid amortisation and interest on the class A loan into new loans, and a crystallisation of certain swap liabilities as loans owed to the swap provider. In parallel, a disposal plan for non-performing properties has been formulated, with restrictions in cash leakage to the sponsor.

Although a structured capex programme has been implemented to enhance the value of the properties, Fitch has reservations about how quickly any improvements will feed into potential liquidation values, particularly for the non-performing homes. Significant risks remain regarding the borrower's ability to secure refinancing at loan maturity, and the servicer's ability to realise sufficient proceeds in time for note maturity in 2018.

The smallest loan, Ocean Park, repaid down to GBP1.0m from GBP5.5m following the sale of a number of properties, with proceeds in excess of the most recent valuations as well as the 'Bsf' market values.

The 'Dsf' ratings will be withdrawn within 11 months of the default of the last rated tranche of the transaction.

RATING SENSITIVITIES
A major delay in the recovery of the APPA loan could result in the class A notes being downgraded.

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 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 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.

SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data provided by Capita as at 15 June 2015
- Transaction reporting provided by Capita as at 03 July 2015.