DBRS Places Two Classes of Taurus CMBS (Pan-Europe) 2007-1 Limited on Under Review Negative, Downgrades Three Classes, Notes Two have Interest in Arrears

DBRS has today placed two classes, Classes B and C, Under Review Negative, downgraded three classes, Classes D, E and F, and noted two classes with Interest in Arrears, Classes E and F of Taurus CMBS (Pan-Europe) 2007-1 Limited.

The changes are primarily due to the delinquency and expected losses associated with the WPC G&S loan and the disruption in the Continental European commercial real estate market. The WPC G&S loan has failed to make any quarterly payments since January 2009. Collateral for the loan consists of two industrial/manufacturing properties, with a total of 17,593 sqm (189,381 sf), located in Germany. The sole tenant at the properties, Gortz & Schiele (G&S), has not paid its rent since September 2008 and has filed an application with the court to open insolvency proceedings. G&S is a manufacturer of high-value components for the auto industry, and major customers include BMW, Mercedes, Volkswagen and General Motors. As a result of the major tenant default, the borrower was required by the loan terms to deposit six months of interest payments (€191,474) into a servicer-controlled account. The borrower fulfilled this requirement and continued to make P&I payments for two quarters. However, the borrower has stopped making P&I payments after January 2009. In addition, the borrower did not extend the remedy period and the deposit, in the amount of €191,474, was used to pay down the loan balance. The loan was transferred to the special servicer on May 21, 2009. At issuance, there was a €990,000 subordinate B-note that represented 13.6% of the whole loan amount. The properties were recently re-appraised, at a value of €3.3 million, which has resulted in an Appraisal Reduction Amount of €4.4million. Based on this new valuation, it is likely that Class F will suffer a 100% loss and Class E will suffer a partial loss.

In addition, the third largest loan in the pool, Apollo CTN, is scheduled to mature in April 2010. The loan is collateralized by six office and research and development properties in Geneva, Switzerland and has performed well since issuance. However, given the low levels of liquidity in the commercial mortgage market, the borrower may find it difficult to refinance within the next several months.

DBRS will take further action once a better understanding of expected losses related to the WPC G&S loan is achieved and the refinancing expectations of Apollo CTN are made clear. A surveillance report providing additional analytical detail will be provided at that time.

The liquidity facility was drawn upon to make up for the missed payment on the WPC G&S loan, for the period ending April 2009. However, for the period ending July 2009, interest was not paid to Classes E & F, though scheduled principal was paid. The liquidity facility was drawn upon during this period, but was used to pay back the liquidity provider for last quarter's draw, instead of being used to make interest payments on Classes E & F. This is the cause of the interest shortfalls to Classes E & F and the reason that the ratings carry the label “Interest in Arrears.”

Note:
All figures are in Euros unless otherwise noted.

The applicable methodologies are CMBS Rating Methodology and CMBS Surveillance, which can be found on our website under Methodologies.

This is a Structured Finance rating.