OREANDA-NEWS. November 30, 2015. Fitch Ratings has affirmed Gemini (Eclipse 2006-3) floating-rate notes due 2019 as follows:

GBP569.2m class A (XS0273575107) affirmed at 'Csf'; Recovery Estimate (RE) RE30%
GBP27.8m class B (XS0273576289): affirmed at 'Csf'; RE0%
GBP101.8m class C (XS0273576446): affirmed at 'Csf''; RE0%
GBP81.4m class D (XS0273576792) affirmed at 'Csf'; RE0%
GBP70.2m class E (XS0273576958): affirmed at 'Csf'; RE0%

The transaction is a securitisation of a GBP850.4m senior loan originated in November 2006 by Barclays Bank plc (A/Outlook Stable/F1). The loan has been in special servicing since 2008 following an uncured loan-to-value (LTV) covenant breach. In July 2015, the collateral consisted of 24 secondary UK commercial properties valued at GBP278m, resulting in a securitised LTV of 349% (including rolled up interest and senior swap liabilities).

KEY RATING DRIVERS
The affirmation reflects the imminent partial write-down of the class A notes and full loss on the remaining tranches. This is expected once the sale of the portfolio is completed. A sale price of GBP311m has been agreed, out of which certain costs, swap and liquidity facility liabilities will have to be met prior to principal payment on the notes.

The 30% Recovery Estimate for the class A notes reflects the significant loss that will be incurred, albeit slightly down from previous estimates. This is down to the sale price being firmer than previously expected and also to a legal ruling on the allocation of sales proceeds towards principal rather than interest.

In October 2015, the courts ruled that all rental income should be used for interest payments, and surrender premiums/sale proceeds for principal payments. Prior to this decision, collateral cash flow had been held back, with GBP15.5m of rent escrowed. This should be available to meet interest expenses, including the portion of liquidity drawings that remains payable in the issuer interest waterfall.

The remainder of the GBP56.5m drawn liquidity facility (GBP47.5m) has, following a restructuring, been allocated to the principal waterfall, where it ranks senior along with the swap (valued at GBP81.7m in July 2015). The restructuring saw the same amount of the class A notes (GBP47.5m) being subordinated to the other notes. This was to simplify negotiations with junior creditors, who stand to receive no principal in any case. Available liquidity is down to GBP7.4m, held as a standby drawing.

RATING SENSITIVITIES
Failure to conclude the sale may reduce the recovery proceeds and add senior costs, diminishing recoveries estimated on the class A notes.

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.

Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction 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.

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.