OREANDA-NEWS. Fitch Ratings has downgraded Juno (Eclipse 2007-2)'s class A notes and removed them from Rating Watch Negative (RWN). The Outlook is Negative. The agency has simultaneously withdrawn its ratings on the transaction. A full list of rating actions can be found at the end of the rating action commentary.

The transaction is a fully funded synthetic securitisation of initially 17 commercial mortgage loans originated by Barclays Bank PLC (Barclays; A/Stable/F1), of which five are outstanding.

KEY RATING DRIVERS
The downgrade reflects further reduction in financial resources available to the issuer since the last rating action in June 2015 to meet mandatory expenses. There is a growing risk that the issuer will be unable to make senior interest payments as early as 1H17. This stems from the delay in resolving the CDS related to the EUR122m Neumarkt loan, which has been in default (subject to German insolvency proceedings) since 2011.

Barclays is only permitted to demand loss protection from the issuer once the loan has passed a liquidation date. In this case, while a EUR119m recovery has been realised and cash released to Barclays by the administrator, the proceedings have not been completed. Therefore the servicer (Capita) has not determined a final loss amount. The result of this is that the "alternative" CDS payments paid by Barclays amount to zero on this balance. At the same time the issuer collateral is yielding zero income given the current negative Euribor rates.

This combination, together with defaults of other loans, prevents the issuer meeting its own funding costs without drawing on the liquidity facility. Delay with settlement of the Neumarkt loan accounts for 80% of liquidity draws, and Fitch estimates the coverage of senior mandatory expenses will be exhausted within six quarters unless loss settlement occurs in time. This in effect imposes a rating cap at 'BBBsf' on the notes, as reflected in today's downgrade. Meanwhile, as recovery proceeds have not been passed through to noteholders, the issuer is effectively funding the loan for free.

According to the documentation, the servicer can determine when it believes no further recoveries are likely to be received. Absent such determination, or prior completion of enforcement, automatic settlement will only occur 150 days prior to legal final maturity, much later than when Fitch expects liquidity to be depleted. Settlement of some of the other outstanding CDS - Seaford and Le Croissant reference obligations - is expected in 1H16. Fitch also notes the possible extension of the Obelisco loan, which should provide some temporary relief (this is assumed in the six quarters coverage expectation).

Fitch is withdrawing its ratings because it has not received the information it needs to make further assumptions regarding what is now the primary driver of the creditworthiness of the notes, namely the timing of the resolution of the Neumarkt CDS. This is a matter that will be determined by Capita in due course.

Fitch estimates 'Bsf' recovery proceeds totalling EUR211m, which is unchanged since the last rating action.

RATING SENSITIVITIES
Not 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 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 the servicer as at end-August 2015
-Transaction reporting provided by the servicer as at end-August 2015
-Cash management reports as provided by the cash manager as at end-August 2015

Full list of rating actions:
EUR114.1m class A (XS0299976323 and XS0302319370): downgraded to 'BBBsf' from 'Asf', off RWN; Outlook Negative; rating withdrawn

EUR68.3m class B (XS0299976752 and XS0302320386): affirmed at 'Bsf'; off RWN, Outlook Stable; rating withdrawn

EUR60m class C (XS0299976836) and XS0302320543): affirmed 'Dsf'; Recovery Estimate: 50%, rating withdrawn

EUR0m class D and E: affirmed at 'Dsf'; Recovery Estimate: 0%; rating withdrawn