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Fitch affirms Taurus CMBS Germany (2006-1) plc

Dec 16 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed Taurus CMBS Germany (2006-1) plc, as follows:

EUR133.2m class A (XS0257712579) affirmed at 'BBsf'; Outlook revised to Negative from Stable

EUR29.9m class B (XS0257714435) affirmed at 'CCCsf'; Recovery Estimate (RE) 30%

EUR18.8m class C (XS0257715242) affirmed at 'CCsf'; RE0%

EUR16.6m class D (XS0257715838) affirmed at 'Csf'; RE0%

KEY RATING DRIVERS

The affirmation is driven by the full repayment of the Hanse Centre and Edam-Ruhr loans and the performance of the three remaining loans, which is in line with previous expectations. The revision of the Outlook on the class A notes to Negative reflects the short time to legal final maturity of the notes in April (Frankfurt: B2B.F - news) 2015. The remaining loans in the portfolio may face protracted work-outs with uncertainty over recovery prospects, mainly due to their letting situation. A sale of all three assets within the next 16 months is therefore considered challenging.

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The Bewag loan (EUR114m, 58% of the outstanding pool balance) is secured by a single-let office building located in Berlin, Germany. Due to the collateral's secondary location and quality, the loan is highly exposed to occupational risk, with the sole tenant, Vattenfall AB (A-/Stable), on a lease expiring in October 2017. Additionally, the property suffers from a high level of over-rentedness with the current rental income representing 137% of the estimated rental value. Fitch believes this asset is unlikely to attract investors' interest and expects the loan to suffer significant losses.

The Norman (Bremen) loan is secured by a shopping centre in Vegesack, near Bremen, Germany. The borrower is going through insolvency proceedings as the B-note lenders did not agree to the terms of a loan extension at loan maturity in October 2010. The servicer is marketing the property for sale, as the bidders from the initial marketing process chose not to purchase the property for various reasons. Since the last review in January 2013, the vacancy has increased to 26% from 13%. The deteriorating income profile, in absence of strong retail space demand for secondary German locations, acts to supress market value and limit future recoveries.

The Walzmuhle loan defaulted at maturity in January 2013 and was transferred to special servicing. The loan's collateral comprises a two-storey multi-let shopping centre located in Ludwigshafen. The shopping centre is anchored by Metro AG (Xetra: 725750 - news) (BBB/Negative), which provides 80% of the income on a lease expiring in December 2019. The secondary location of the assets combined with 50% of physical vacancy makes difficult to attract new tenants and potential buyers. In Fitch's opinion, a sale of the Bremen and the Bewag properties would most likely see the complete write-down of the class C and D notes and a partial write down of the class B notes. Following the default of the Bewag loan in April 2013 the principal repayment of the notes has turned to sequential.

RATING SENSITIVITIES

In the event of a sale, Fitch estimates 'Bsf' net property proceeds of approximately EUR142m. If the sales proceeds fall short of expected or the sales do not occur during the next year, this could lead to negative rating action on the notes.

A performance update report will shortly be available on www.fitchratings.com.