DBRS Downgrades Seven Classes of Taurus CMBS (Pan-Europe) 2007-1 Limited and Maintains Six Classes Under Review with Negative Implications

DBRS, Inc. (DBRS) has today downgraded the ratings of seven classes of Commercial Mortgage Backed Floating Rate Notes (the Notes) issued by Taurus CMBS (Pan-Europe) 2007-1 Limited (Taurus or the Trust), as follows:

-- Class A1 to BB (high) (sf) from A (low) (sf)
-- Class A2 to BB (low) (sf) from BBB (sf)
-- Class B to B (low) (sf) from BB (high) (sf)
-- Class C to CCC (sf) from B (sf)
-- Class D to C (sf) from CCC (sf)
-- Class X1 to BB (high) (sf) from AAA (sf)
-- Class X2 to BB (high) (sf) from AAA (sf)

In conjunction with these rating actions, DBRS has also today maintained the ratings of the following six classes of Notes Under Review with Negative Implications, as follows:

-- Class A1, rated BB (high) (sf)
-- Class A2, rated BB (low) (sf)
-- Class B, rated B (low) (sf)
-- Class C, rated CCC (sf)
-- Class X1, rated BB (high) (sf)
-- Class X2, rated BB (high) (sf)

Classes A1, A2, B, C and D also have Interest in Arrears.

The rating downgrades reflect the decreasing credit characteristics of the transaction as a result of the largest loan being transferred to special servicing and the subsequent loan resolution process. The Fishman JEC Portfolio (Fishman) loan currently represents 79.3% of the current pool balance and is the largest of three loans remaining in the transaction. The Fishman loan is secured by 16 office and industrial properties located throughout France after two properties were sold last quarter. The loan transferred to special servicing in May 2014 after the borrower triggered insolvency proceedings, ahead of the originally scheduled July 2014 maturity date. According to the servicer, the Safeguard Proceedings observation period was extended to July 2015 after it was initially scheduled to expire in January 2015. During the Safeguard Proceedings, all income is frozen until a safeguard plan is instituted. This includes the sale proceeds of EUR 4.6 million, which were collected after the properties in Sallanches and St. Ouen L’Aumone were sold and are held in escrow by the Judicial Administrator. To date, the borrower and the Judicial Administrator have been unable to negotiate loan resolution terms and timelines due to a difference in the resolution approach regarding the largest six assets in the portfolio, which account for roughly 90% of the portfolio’s remaining value. The borrower believes these properties should not be marketed for sale until 2017 at the earliest.

In May 2015, an Event of Default occurred as the Issuer was unable to pay scheduled interest to all outstanding notes from a shortage of incoming principal and interest collections. As a result, a noteholder meeting is expected be scheduled within the 30 days following the declaration of the Event of Default to determine the resolution strategy of the Fishman loan. Once the noteholders determine a strategy, the Note Trustee will direct the servicer in future actions to be taken, as the servicer no longer has direct control in the workout process.

The bonds remain Under Review with Negative Implications as a result of a to-be-determined disposition strategy and the unknown resolution timeline. In December 2014, the servicer obtained an updated appraised value of the remaining 16 properties securing the loan, which totaled EUR 127.1 million. In comparison, the June 2013 appraised value, which at that time included the two recently sold properties, totaled EUR 158.0 million. Based on the new appraised value, the loan has an LTV of 105.6%.

The ratings of Classes X1 and X2 are entitled to payments of excess interest only and were downgraded to coincide with the Class A1 rating where their payment priority in the waterfall resides. Neither Class X1 or X2 have received any interest payments since the May 2014 remittance; however, these classes do not accrue interest shortfalls.

Note:
All figures are in euros unless otherwise noted.

The applicable methodologies are European CMBS Rating Methodology, European CMBS Surveillance, Legal Criteria for European Structured Finance Transactions, Unified Interest Rate Model for European Securitisations and Derivative Criteria for European Structured Finance Transactions, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Rating Limited for use in the European Union.

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.

The last rating action on this transaction took place on February 19, 2015.

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

A decrease of 10% and 20% in the DBRS 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 A at BB (sf)
-- 20% decline in DBRS NCF, expected rating of Class A at B (sf)

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

Class B 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 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 D at C (sf)
-- 20% decline in DBRS NCF, expected rating of Class D at C (sf)

Class X1 Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class X1 at BB (sf)
-- 20% decline in DBRS NCF, expected rating of Class X1 at B (sf)

Class X2 Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class X2 at BB (sf)
-- 20% decline in DBRS NCF, expected rating of Class X2 at B (sf)

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