OREANDA-NEWS. November 17, 2015. Fitch Ratings has upgraded the class D notes of L-MAP One Funding (L-MAP One). At the same time, the agency has affirmed other rated notes in L-MAP One and all rated notes in Leopard Two Funding Limited (Leopard Two). These transactions are securitisations of fully amortising mortgage loans backed by multi-family apartment properties throughout Japan. The rating actions are listed below.

L-MAP One Funding Limited
JPY7,153m* Class A notes affirmed at 'AAAsf'; Outlook Stable
JPY715m* Class B notes affirmed at 'AAsf'; Outlook Stable
JPY536m* Class C notes affirmed at 'Asf'; Outlook Stable
JPY70m* Class D notes upgraded to 'Asf' from 'BBBsf'; Outlook Stable

Leopard Two Funding Limited
JPY2,401m* Class A-1 notes affirmed at 'AAAsf'; Outlook Stable
JPY2,401m* Class A-2 notes affirmed at 'AAAsf'; Outlook Stable
JPY520m* Class B notes affirmed at 'AAsf'; Outlook Stable
JPY520m* Class C notes affirmed at 'Asf'; Outlook Stable
JPY540m* Class D notes affirmed at 'BBsf'; Outlook Stable
JPY41m* Class E notes affirmed at 'BBsf'; Outlook Stable

*as of 12 November 2015

KEY RATING DRIVERS
The upgrade of the class D notes of L-MAP One reflects growth in credit enhancement (CE). Fitch Ratings expects the improvement in CE to continue, and the notes to be repaid faster than the other rated notes in this transaction, in accordance with the transaction agreements. The class D notes are likely to be fully redeemed within three months.

The affirmations of all the rated notes in both transactions - other than the class D notes of L-MAP One - reflect Fitch's view that available CE levels are sufficient to support the current ratings. The CE levels have grown due to principal repayment of the notes from scheduled amortisation and prepayments of the underlying loans. Fitch considers that the improved CE is sufficient to offset the decline in expected rent income - which has resulted in the agency increasing its assumptions of net loss from the underlying loan pool in stressed scenarios.

The number of defaulted loans has been limited since closing - there have been two defaults from L-MAP One and one from Leopard Two to date. The master-lease structure has contributed to stable loan performance of these transactions. Fitch believes this trend will continue, given prospective future rental performance based on the master-lease agreements.

RATING SENSITIVITIES
An increase in the delinquency or default rate beyond Fitch's expectations may lead to higher loss assumptions, which may in turn affect the ratings of these transactions.

For L-MAP One, lower-rated notes tend to have greater protection against a downgrade, given the waterfall structure of this transaction; however, the class A and B notes can also be supported at the current ratings even if assumed property cash flows were to decline by around 20% from the agency's initial assumption.

We consider the possibility of a downgrade of Leopard Two as very low, due to significant progress of the sequential principal repayment. All the notes can be supported at the current ratings even if assumed property cash flows were to decline by around 35% from the agency's initial assumption.

DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to these rating actions.

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the underlying pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third-party assessment of the underlying pools information or conducted a review of loan origination files as part of its ongoing monitoring.