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

DBRS Ratings Limited (DBRS) has today downgraded the rating of the following class of Commercial Mortgage Backed Floating Rate Notes (the Notes) issued by Taurus CMBS (Pan-Europe) 2007-1 Limited:

-- Class A2 to CCC (sf) from B (low) (sf)

In conjunction with this rating action, DBRS has today also confirmed the ratings of the remaining four classes of the transaction as follows:

-- Class A1 at B (sf)
-- Class B at CCC (sf)
-- Class C at CCC (sf)
-- Class D at C (sf)

Classes C and D also have Interest in Arrears. The trend on Class A1 is Negative. The other classes have ratings that carry no trends.

The rating downgrade of Class A2 reflects the uncertainty in the Fishman JEC Portfolio (Fishman JEC) individual asset disposal plan, which may delay the principal and interest repayment due at bond maturity in February 2020, ten months ahead of the Fishman JEC extended maturity date in December 2020. Therefore, DBRS also maintains the Negative trend for the senior class.

The Fishman JEC loan currently represents 84.0% (EUR 127.4 million) of the current pool balance and is the larger of the two loans remain in the transaction, both in special servicing. The Fishman JEC loan is secured by 15 office and industrial properties located throughout France. The loan initially transferred to special servicing in May 2014 after the borrower triggered insolvency proceedings ahead of the originally scheduled maturity in July 2014. Therefore, the Fishman JEC loan was specially serviced whereby cash flows and asset disposal proceeds were frozen, which led to drawings being made to the liquidity facility. On 7 September 2015, the French courts formally adopted the Safeguard Plan for Fishman JEC borrowers, unfreezing payments and allowing the issuer to have cleared accrued and unpaid interest on the Class A1, A2 and B notes, as of August 2016. On each anniversary of the adoption of the Safeguard Plan, the Fishman JEC loan will amortise by a scheduled increasing percentage of the loan balance. The next amortisation payment is scheduled for September 2016 and will represent 5.0% of the Fishman JEC whole loan balance. Based on the adopted Safeguard Plan, Fishman JEC borrowers are obliged to start marketing all remaining properties by certain dates set out. As of August 2016, 10 properties were scheduled to be marketed, with only one secondary asset being sold. Although DBRS expects the Fishman JEC loan to continue to pay interest, the principal repayment at bond maturity will strongly depend on the borrowers’ ability to dispose properties of the portfolio ahead of schedule. The Fishman JEC portfolio is currently 84.1% occupied; the top five tenants represent 76.6% of the total rent with a weighted-average remaining lease-to-break option of 1 year and 9 months. The portfolio was reappraised in December 2014 at EUR 126.3 million, excluding the asset sold, which resulted in a loan-to-value ratio of 100.8%.

The Hutley loan, which represents 15.9% (EUR 24.1 million) of the current pool, is currently secured by 11 properties containing office, retail and leisure components located throughout Germany. No property disposal has been made since issuance. The Hutley loan was restructured in 2011, which resulted in a new loan maturity in July 2014 with two one-year extension options to extend the maturity date to July 2015 and then July 2016. The borrower exercised both extension options; in July 2016, the Hutley borrower failed to pay in full all amounts outstanding in relation to the Hutley whole loan. As such, a loan event of default has occurred, and the Hutley loan became specially serviced as of 1 August 2016. According to the most recent RIS notification, the Hutley borrower has informed the Servicer and the Special Servicer that it is in the process of negotiating the terms of a refinancing for the Hutley Whole Loan and that completion of the refinancing remains subject, amongst others, to the parties, including the Hutley Borrower, locating the relevant Land Charge certificate. A cancellation procedure with respect to the Land Charge certificate has been commenced and is expected to take approximately nine months. Completion of the refinancing is expected to occur as soon as possible once the Land Charge certificate has been located or once the cancellation procedure has been completed. As of the August 2016 deal summary report , the overall portfolio occupancy has improved to 88.0%, slightly higher than the 86.2% occupancy reported in the previous review last year. The top three tenants account for 49.4% of the rental income with a weighted-average lease-to-term of 5.54 years.

DBRS’s rating actions follow the current credit characteristics and performance of the transaction since the last DBRS rating action in September 2015.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is European CMBS Surveillance.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release.

These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of information used for this rating include the Servicer: Capita Asset Services (Ireland) Limited; and Special Servicer: Capita Asset Services (UK) Limited.

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS was not supplied with third party assessments. However, this did not impact the rating analysis.

DBRS considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 2 September 2015, when DBRS downgraded five classes and withdrew ratings on two classes of this transaction.

The lead responsibilities for this transaction have been transferred to Jorge Lopez Herguido.

Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):

A decrease of 10% and 20% in the DBRS net cash flow (NCF), derived by looking at comparable properties, market rents, market occupancies in addition to expenses ratios, capital expenditures and re-tenanting costs, would lead to the following ratings in the transaction, as noted below for each class respectively:

Class A1 Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class CCC (sf)
-- 20% decline in DBRS NCF, expected rating of Class CCC (sf)

Class A2 Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class B at CCC (sf)
-- 20% decline in DBRS NCF, expected rating of Class B at CCC (sf)

Class B Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class C at CCC (sf)
-- 20% decline in DBRS NCF, expected rating of Class C at CCC (sf)

Class C Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class C at CCC (sf)
-- 20% decline in DBRS NCF, expected rating of Class C at CCC (sf)

Class D Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class C at C (sf)
-- 20% decline in DBRS NCF, expected rating of Class C at C (sf)

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are resolved within a 12-month period. DBRS’s outlooks and ratings are monitored.

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Abbey Fitzgerald
Initial Rating Date: 2 July 2007
Initial Rating Committee Chair: Mary Jane Potthoff, Managing Director, Global CMBS
Lead Surveillance Analyst: Jorge Lopez Herguido, Financial Analyst, European CMBS
Rating Committee Chair: Erin Stafford, Managing Director, Global CMBS

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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

-- European CMBS Surveillance
-- European CMBS Rating Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Unified Interest Rate Model for European Securitisations

A description of how DBRS analysis structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375