DBRS Downgrades Four Classes and Confirms Five of Taurus CMBS (Pan-Europe) 2007-1 Limited

DBRS has today downgraded the following ratings of Taurus CMBS (Pan-Europe) 2007-1 Limited (Taurus):

-- Class A1 to A (low) (sf) from AA (sf)
-- Class A2 to BBB (sf) from A (sf)
-- Class B to BB (high) (sf) from BBB (sf)
-- Class C to B (sf) from BB (sf)

In addition, DBRS has confirmed the ratings of the following five classes of Taurus:

-- Class X1 at AAA (sf)
-- Class X2 at AAA (sf)
-- Class D at CCC (sf)
-- Class E at C (sf)
-- Class F at C (sf)

The trends on Classes A1, A2, B, C, X1 and X2 are Stable. No trends are assigned to Classes D, E and F.

This transaction originally consisted of one fixed-rate loan and 12 floating-rate loans secured by 57 residential and commercial properties located in Switzerland, Germany and France. The original securitised balance of the pool was EUR 549,891,408. According to the May 2013 Distribution Date Statement, six of the original 13 loans remain in the pool, with a securitised balance of EUR 234,212,905. The pool has had a total collateral reduction of 57%, since issuance, with only 34 properties remaining. The pool has become more concentrated over the life of the transaction, with all remaining collateral being located in Germany and France.

As of the May 2013 Deal Summary Report, there are no loans on the servicer’s watchlist, and one loan, representing 7.16% of the current pool, is in special servicing. Four of the remaining loans, representing 90.41% of the current pool balance, are scheduled to mature in 2014, and one loan, representing 2.43% of the current pool balance, is scheduled to mature in 2017.

The Leipzig Portfolio loan was transferred to special servicing when the borrower was not able to repay the loan at maturity in January 2013. The loan is secured by an office property located in Leipzig, Germany, and is fully leased to a European banking group. The tenant has occupied the building since 1996 and is on a lease through September 2016 with two four-year extension options. The borrower and special servicer are currently in a temporary standstill agreement until July 2013 and continue to discuss resolution options. The property was recently valued in February 2013 at EUR 12.6 million, implying a 54.5% value decline compared to EUR 27.7 million at issuance. The recent drop in property value results in a whole loan-to-value ratio of 175.92%, which will amplify the borrower’s difficulties when securing takeout financing.

In general, the collateral securing the loans in this transaction have been subject to the overall deflation in property values in the greater European commercial real estate market. When taking the market decline into account, the capacity of debt, on a loan-by-loan basis, in the DBRS analysis, has decreased substantially since issuance.

DBRS has downgraded the above mentioned classes as a result of the increase in pool concentration, the uncertainty with the 2014 loan maturities and the refinance risk associated with those loans. In addition, the servicer did not provide additional clarification on a number of questions DBRS had on the individual loans, as well as the transaction in general. As a result, DBRS used conservative modelling assumptions, absent these clarifications, which further supports the downgrades.

Notes:
The principal methodologies applicable are European CMBS Rating Methodology, European CMBS Surveillance, Legal Criteria for European Structured Finance Transactions, Unified Interest Rate Model for European Securitisations and Swap Criteria for European Structured Finance Transactions, which can be found on www.dbrs.com.

The sources of information used for this rating include Taurus CMBS (Pan-Europe) 2007-1 Limited and Capita Asset Services (London) Limited. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

Initial Lead Analyst: Abbey Fitzgerald
Initial Rating Date: July 2, 2007
Lead Surveillance Analyst: Scott Goedken
Most Recent Rating Date: March 2, 2012
Rating Committee Chair: Erin Stafford