Oct 5 - Fitch Ratings has downgraded WILCO 2007-1 GmbH's commercial mortgage-backed floating-rate notes due 2024 as follows:
EUR36.32m Class A: downgraded to 'AAsf' from 'AAAsf'; Outlook Stable
EUR42.45m Class B: downgraded to 'Bsf' from 'BBBsf'; Outlook Negative
The downgrades are driven by the significant re-letting risk prevalent in the transaction. All six outstanding loans are secured by single assets, and four of them are let to individual tenants, on leases with expiries ranging from less than a year to 8.8 years.
Fitch is particularly concerned about the three largest loans, which account for over two-thirds of the current aggregate outstanding principal balance. All three loans share similar characteristics in that they are scheduled to mature in 2013 and are secured on single Amsterdam offices let to single tenants with leases expiring in less than two years.
The agency believes that if any of these assets were to become vacant, the refurbishment costs required to secure a re-letting would be significant. Without an income stream, the loan sponsors would be forced to use funds from outside the transaction to fund any capex work, along with all ongoing tax and utility costs.
The sponsors may be willing to do this as the whole loan-to-value ratios (LTV) on all six loans are between 44% and 71%, indicating that significant equity remains. However, Fitch believes a distressed sale on a vacant asset could leave several of the loans with LTVs close to 100%. Whilst the credit enhancement offered by the class B note remains significant to project full repayment in the majority of scenarios, the aforementioned occupational risk is not commensurate with the highest rating for the most senior class. The Outlook on the class B notes is Negative, reflecting that they are directly exposed to event risks connected to the weakest loans.
Since the last rating action in October 2011, three loans have repaid in full, with the funds flowing sequentially and reducing the class A balance by EUR113.29m.
Fitch will continue to monitor the performance of the transaction. A performance report will shortly be available on
Additional information is available at
. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
The sources of information used to assess these ratings were the issuer, servicer, and periodic cash manager and servicer reports.
Applicable criteria, "EMEA CMBS Rating Criteria" dated 4 April 2012, "Global Structured Finance Rating Criteria", dated 6 June 2012 are available at
Applicable Criteria and Related Research:
EMEA CMBS Rating Criteria
Global Structured Finance Rating Criteria
(New York Ratings Team)