Rating Lowered On RIVOLI Pan Europe 1#s Class B European CMBS Notes Following Class C Affirmed

Stocks and Financial Services Press Releases Friday July 14, 2017 17:08
LONDON--14 Jul--S&P Global Ratings

LONDON (S&P Global Ratings) July 14, 2017--S&P Global ratings today lowered to 'CCC+ (sf)' from 'BB- (sf)' its credit rating on RIVOLI Pan Europe 1 PLC's class B notes. At the same time, we have affirmed our 'CCC- (sf)' rating on the class C notes (see list below). Today's rating actions follow our review of the underlying loan's credit quality by applying our criteria for rating European commercial mortgage-backed securities (CMBS) transactions (see "European CMBS Methodology And Assumptions," published on Nov. 7, 2012).

The transaction is now backed by one loan secured by one office property located in France. RIVE DEFENSE LOAN (100% OF THE POOL) The securitized loan has an outstanding balance of €59.1 million, which represents a 50% pari passu piece of a whole loan. The other 50% pari passu piece does not form part of this securitization.

The loan is secured by a single office property located in Nanterre, near La Defense (France), which is currently unoccupied following the lease termination of the sole tenant, La Societe Francais du Radiotelephone (SFR), in January 2016. As part of the lease termination agreement the borrower received an allowance of €38.1 million, equivalent to the rent payable to August 2018.

The whole loan failed to repay on its scheduled maturity date in July 2012 and is now in special servicing.
As part of an amended safeguard plan that was agreed between the parties in December 2016, the loan maturity date had been extended to April 2018.

We understand that the special servicer continues to work closely with the relevant stakeholders on a work-out strategy, which by way of planning consent granted in January 2016, includes the potential redevelopment of the property to a new 80,000 square meter office campus development. The property is valued at €102.6 million, based on a June 2015 valuation.

This reflects a whole loan-to-value of 115%.

We have assumed principal losses on the loan in our 'B' rating stress scenario. RATING ACTIONS Our ratings on RIVOLI Pan Europe 1's notes address timely payment of interest and repayment of principal not later than the August 2018 legal final maturity date.

Our analysis indicates that the available credit enhancement for the class B notes is not sufficient to mitigate the risk of principal losses from the underlying loans in a 'B' stress scenario.

We also believe that this class of notes has become more vulnerable to timing risk relating to the repayment of principal no later than the legal final maturity date. In our opinion, the class B notes face at least a one-in-two likelihood of default at the legal maturity date.

Therefore, we have lowered to 'CCC+ (sf)' from 'BB- (sf)' our rating on the class B notes in line with our criteria for assigning 'CCC' category ratings (see "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," published on Oct. 1, 2012). In our opinion, the repayment of the class C notes remains dependent on favorable economic conditions.

They face at least a one-in-two likelihood of default. Therefore, we have affirmed our 'CCC- (sf)' rating on the class C notes, in line with our criteria for assigning 'CCC' category ratings.
RIVOLI Pan Europe 1 is a true sale transaction that closed in December 2006 and was initially backed by a pool of five loans secured against 24 commercial properties in Spain, France, and The Netherlands.
Four loans have repaid since closing and the outstanding note balance has reduced to €59.1 million from €479.8 million at closing.

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