OREANDA-NEWS. Fitch Ratings has downgraded Triton (European Loan Conduit No. 26) Plc's junior notes and revised the Outlook on the senior tranches as follows:

USD23.3m Class B (XS0294620207) affirmed at 'Asf'; Outlook revised to Stable from Negative
GBP0.5m Class C (XS0294603294) affirmed at 'Asf'; Outlook revised to Stable from Negative
GBP2m Class F (XS0294604771) affirmed at 'CCsf'; Recovery Estimate (RE) 100%
GBP4.1m Class G (XS0294607287) downgraded to 'Csf' from 'CCsf'; RE 100%
GBP4.8m Class H (XS0294608335) downgraded to 'Csf' from 'CCsf'; RE 95%

Triton was originally a securitisation of four commercial mortgage loans, totalling GBP601.15m, originated by Morgan Stanley. The three largest loans have since repaid in full leaving the GBP23.3m Nextra loan as the remaining loan. The sequential trigger was never breached for this transaction and hence a modified pro rata principal allocation has been applied throughout. This has led to the class D and E notes being repaid in full prior to the class B and C notes.

KEY RATING DRIVERS
The sale of the Rickmansworth asset, one of the two remaining properties backing the Nextra loan, resulted in GBP17.6m loan principal proceeds. These will be applied against the notes at the January 2016 interest payment date (IPD) and will result in the full repayment of the class B and C notes. The class F notes will then become the most senior class outstanding, with an estimated balance of GBP1m.

As highlighted in Fitch's last rating action (see Fitch Downgrades Triton (European Loan Conduit No. 26) Plc dated 18 December 2014 on www.fitchrating.com), the transaction's senior costs are forecast to be well above the interest receipts accruing on a collateral balance of just over GBP5m. The transaction's inability to meet its senior expenses (including interest on the most senior class of notes) will trigger a note event of default. This is reflected in the ratings of the class F G and H notes. At this stage, only an imminent disposal of the last remaining asset would avoid a default of the class F notes, while unpaid interest on the two most junior classes will not be recoverable and a default is therefore seen as inevitable.

Fitch expects the Nextra loan to repay in full at its extended maturity in October 2016, bringing to an end the CMBS financing. Following a note event of default the class F noteholders would have the option to trigger an enforcement of the transaction's security, which would have the effect of combining the interest and principal waterfalls.

A combined post-enforcement priority of payment would discharge senior expenses in full and pay class F interest amounts, at the expense of class H principal. Given the small amounts at stake (loss of few quarters of interest on a GBP1m class of notes) and the short time until the expected repayment, the senior noteholders' chosen action remains uncertain. The recovery estimate on the class H notes reflects Fitch's expectations of an enforcement of the transaction's security.

RATING SENSITIVITIES
The ratings of the notes are unlikely to be sensitive to future changes, with default the only likely option. An increase in senior fees could lower recoveries on the class H notes further, should the post-enforcement waterfall be applicable.

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 transactions. 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.

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 Mount Street Mortgage Serving as at 9 November 2015
-Transaction reporting provided by Wells Fargo as at 27 October 2015 .