Nov 08 - Fitch Ratings has affirmed Duncannon CRE CDO I p.l.c. notes, as follows:
Class X (XS0311199367): affirmed at ‘BBsf’, Outlook Stable
Class A (XS0311199524): affirmed at ‘Bsf’, Outlook Stable
Class B (XS0311200710): affirmed at ‘CCsf’
Class C-1 (XS0311202500): affirmed at ‘Csf’
Class C-2 (XS0311203813): affirmed at ‘Csf’
Class D-1 (XS0311204464): affirmed at ‘Csf’
Class D-2 (XS0311204621): affirmed at ‘Csf’
Class D-3 (XS0311204977): affirmed at ‘Csf’
Class E-1 (XS0311206329): affirmed at ‘Csf’
Class E-2 (XS0311206592): affirmed at ‘Csf’
The affirmation follows the agency’s annual review of the transaction and reflects the increased credit enhancement available for classes A and B, which mitigates the deterioration in the performance of the underlying assets. Since December 2011 EUR82.2m of class A notes have been bought back and EUR99.9m of new class A notes have been issued to repay the revolving credit facility in full.
The class X notes rank pari passu with the class A notes and are paid senior subject to a scheduled amortisation, with 16.7% of the balance outstanding at the time of review.
For the junior notes (classes C, D and E) the levels of credit protection have decreased due to the deterioration in the performance but still allow the notes to withstand the current level of rating stress.
There has been a notable increase in defaults since the last review, totalling EUR251m in September 2012, with low recovery expectations as the majority of the portfolio is non-senior or has a recovery expectation lower than 50%.
Duncannon CRE CDO I is a managed cash securitisation of commercial real estate assets, consisting primarily of CMBS, commercial mortgage B notes and mezzanine mortgage loans. The transaction is still in its replenishment period, ending in June 2013.
As per September 2012 manager’s report, the pool comprised 69.4% CMBS notes, 16.2% B notes, 10.5% commercial ABS and roughly 4% commercial real estate senior unsecured debt. By country, the main exposure is to Germany, representing 39% of the portfolio, followed by UK with 20% of the pool. The transaction is also exposed to peripheral countries as Italy accounts for 16% of the assets.