OREANDA-NEWS. Fitch Ratings has upgraded Gate SME CLO 2006-1 Ltd's class A and B notes, as follows:

EUR42m class A notes (ISIN: XS0271959388): upgraded to 'B+sf' from 'Bsf'; Outlook Stable
EUR26.5m class B notes (ISIN: XS0271960048): upgraded to'Bsf' from 'B-sf'; Outlook Stable
EUR7.5m class C notes (ISIN: XS0271960550): affirmed at 'B-sf'; Outlook Stable
EUR20m class D notes (ISIN: XS0271961012): affirmed at 'CCsf'; RE0%
EUR15.5m class E notes (ISIN: XS0271961103): affirmed at 'CCsf'; RE0%

The transaction is a partially funded synthetic CDO referencing a portfolio of loans, revolving credit facilities and other payment claims to SMEs and larger companies based predominantly in Germany. The debt instruments were originated by Deutsche Bank AG (A/Negative/F1).

KEY RATING DRIVERS
The portfolio performance remains stable. Additional defaults since last review amount to EUR1.8m, or 0.09% of the initial portfolio notional. Cumulative realised losses equal 1.98% of the initial pool. No additional losses have been realised since the last review. The cumulative recovery rate achieved from liquidations equals 30%.

To analyse the portfolio credit quality, Fitch used its Portfolio Credit Model, which derives rating-dependent default, recovery and loss rates. Credit enhancement for the class A and B notes has increased, enabling them to withstand slightly higher losses, which led to their upgrade. The credit protection for the other notes is commensurate with their ratings.

RATING SENSITIVITIES
The transaction is sensitive to the default of a few large obligors (event risk). The portfolio is highly concentrated. The largest obligor group accounts for 1.8% of the pool, while the top 10 obligor groups amount to 14.7%.

Fitch assigns Recovery Estimates (RE) to all notes rated 'CCCsf' or below. REs are forward-looking, taking into account Fitch's expectations for principal repayments on a distressed structured finance security. The REs of 0% mirrors the agency's expectation of a full loss allocation to the class D and E 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.

SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data provided by Deutsche Bank as of 31 August 2015
- Transaction reporting provided by Deutsche Bank as of 15 July 2015 and 15 October 2015