July 16 - Fitch Ratings has affirmed Semper Finance 2006-1 Ltd. as follows:
EUR114,091,488 Senior Swap affirmed at ‘AAAsf’; Outlook Stable
EUR41,945 Class A+ (ISIN: XS0274873941) affirmed at ‘AAAsf’; Outlook Stable
EUR138,000,000 Class A (ISIN: XS0274874246) affirmed at ‘AAAsf’; Outlook Stable
EUR111,500,000 Class B (ISIN: XS0274874592) affirmed at ‘AAAsf’ ; Outlook Stable
EUR92,500,000 Class C (ISIN: XS0274874832) affirmed at ‘AAsf’; Outlook Positive
EUR83,000,000 Class D (ISIN: XS0274875052) affirmed at ‘BBB+sf’; Outlook
EUR32,700,000 Class E (ISIN: XS0274875565) affirmed at ‘BB+sf’; Outlook Positive
The affirmation is driven by strong collateral performance, scheduled amortisation and loan repayments. As a result, the reference pool has reduced in balance to EUR604.3m from EUR678.5m (EUR1.85bn at closing) since Fitch’s last rating action in August 2011. Since the principal available funds are distributed to the notes sequentially, the credit enhancement available to each class has also increased. Moreover, Fitch believes that the risk profile of the remaining reference pool has stayed largely stable.
While the weighted average (WA) vacancy across the reference pool has remained broadly unchanged since the last review (up slightly since closing), the WA loan-to-value ratio has fallen to 46.9% from 48.1% at the last review (64.7% at closing); over the same period, interest coverage has improved to 3.7x from 3.4x (2.7x at closing). Furthermore, there has been no credit events (defined as bankruptcy of the relevant borrower or failure to pay) since the transaction closed in 2006.
Semper 2006-1 is a synthetic securitisation of commercial mortgage loans originated by Eurohypo AG (‘A-'/‘F1’/Stable). Eurohypo bought credit protection on the reference portfolio by entering into a senior guarantee with a senior counterparty and an issuer guarantee with Semper Finance 2006-1. The issuer, in turn, transferred its assumed risk to the capital markets by issuing classes A+ to F credit-linked notes (CLNs). In the event of a credit event on the reference portfolio (bankruptcy of the relevant borrower or failure to pay), losses will first be allocated against the outstanding threshold amount of EUR25.07m. Any further losses will be allocated to the CLNs in reverse order of seniority. Amortisation is applied on a fully-sequential basis.
Eurohypo does not meet the ratings expected from a direct support counterparty under Fitch’s counterparty criteria. To mitigate this risk, Eurohypo pays the guarantee fee to the issuer six months in advance of each interest payment date. In this manner, any payment interruption risk due to a “jump-to-default” of the guarantor is addressed. The issuer account in which this cash is deposited is complaint with Fitch’s counterparty criteria.
A performance update will shortly be available on www.fitchratings.com.