July 25, 2012 / 3:30 PM / 5 years ago

TEXT-Fitch cuts Titan Europe 2006-5 PLC

 (The following statement was released by the rating agency)
 July 25 Fitch Ratings has downgraded Titan Europe 2006-5 plc's classes A3 to
D and affirmed all others classes; as follows:

EUR294.3m Class A1 (XS0277721618) affirmed at 'AAsf'; Outlook Stable

EUR109m Class A2 (XS0277725361) affirmed at 'Asf'; Outlook Stable 

EUR60.1m Class A3 (XS0277726500) downgraded to 'BBsf' from 'BBB-'; Outlook 

EUR55.1m Class B (XS0277728381) downgraded to 'CCCsf' from 'Bsf'; Recovery 
Estimate (RE) 65%

EUR41.7m Class C (XS0277729439) downgraded to 'CCsf' from 'CCCsf'; RE0%

EUR35.9m Class D (XS0277732144) downgraded to 'Csf' from 'CCsf'; RE0% 

EUR4.9m Class E (XS0277733548) affirmed at 'Csf' ; RE0% 

EUR11.9m Class F (XS0277734199) affirmed at 'Csf'; RE0% 

The downgrade of the note classes A3 to D is reflective of the higher level of 
losses expected to emerge from both the EUR239.6m Diva Multifamily Portfolio 
loan and the EUR114.8m Quartier Shopping Centre loan. 

The collateral supporting the Diva Multifamily Portfolio loan was sold in 
February 2012 following a work out of the loan which was brought on by the 
insolvency of the sponsor. Gross sale proceeds were EUR203.5m against a 
securitised loan balance of EUR239.6m. However net proceeds have not been 
distributed, due to subordinate creditors challenging the interpretation of 
priority of payments, as reported in the loan's Intercreditor Deed. Given the 
lack of clarity, Fitch has took a conservative stance and has estimated that 
losses arising from this loan will completely write down the note classes D 
through F and will likely also impact the class C. 

The Quartier 206 Shopping Centre loan is secured by a retail/office mixed-use 
property well located in the high end shopping area of Friedrichstrasse, Berlin.
As reported at the last review, the performance of the collateral deteriorated 
in 2010 due to a significant reduction in rental income, largely due to the non 
payment of contracted rental obligations by borrower-related entities. The 
borrower was forced into administration in July 2011, with the administrator 
appointing a new asset manager to stabilise future income and preserve the 
intrinsic value of this potentially prime asset. The most recent reported 
interest coverage ratio (ICR), as at Q211, is only 0.31x, which suggests that 
ongoing interest shortfalls are accruing and capitalising, a factor which may 
further constrain loan recoveries. Notwithstanding the asset location, Fitch 
estimates the loan to value ratio (LTV) to be in excess of 140% and therefore 
projects a substantial loss in its analysis. When combined with the expected 
losses on the Diva loan, the partial write-downs may reach as high as the class 
B notes.  

With the sequential payment trigger now irreversible, Fitch regards the EUR160m 
Hotel Adlon loan, originally envisaged to pay down in a modified pro-rata 
fashion, to be a material driver to the redemption of the senior note classes. 
The loan is secured by a prominent five star hotel adjacent to the Brandenburg 
Gate in Berlin, Germany. The collateral was re-valued in July 2011 at EUR242m, 
representing a LTV of 66% and although Fitch estimates leverage to be higher, 
the agency believes that the 'trophy nature' of the asset should still attract 
investor demand and therefore it is expected that the loan will substantially 
contribute to the repayment of the class A notes. 

Titan Europe 2006-5 plc closed in December 2006 and was originally the 
securitisation of eight commercial loans originated by Credit Suisse 
('A'/Stable/'F1'). At the first interest payment date (IPD), the EUR40.2m Hotel 
Balneario Blancafort loan defaulted due to non-payment of debt service and was 
subsequently repurchased by the originator. No other loans have since repaid, 
leaving the portfolio with seven loans secured over 32 properties located across
Germany (excludes properties related to the Diva loan which have been sold); 
with an aggregate securitised balance of EUR611.8m.

Fitch will continue to monitor the performance of the transaction. A performance
update report is available on www.fitchratings.com.

For all of Fitch's Eurozone Crisis commentary go to here

 (Caryn Trokie, New York Ratings Unit)

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