OREANDA-NEWS. Fitch Ratings has downgraded EuroProp (EMC-VI) S. A.'s floating-rate notes due April 2017 as follows:

EUR80.4m class A (XS0301901657) downgraded to 'CCsf' from 'Bsf'; Recovery Estimate (RE) 100%

EUR30m class B (XS0301902622) downgraded to 'Csf' from 'CCCsf'; RE100%

EUR35m class C (XS0301903356) downgraded to 'Csf' from 'CCsf'; RE30%

EUR6.6m class D (XS0301903513) downgraded to Dsf' from 'CCsf'; RE0%

EUR0m class E (XS0301903943) downgraded to Dsf' from 'Csf'; RE0%

EUR0m class F (XS0301904248) downgraded to Dsf' from 'Csf'; RE0%

EMC VI - Europrop is a securitisation of 18 commercial mortgage loans originated by Citibank, N. A., London Branch and Citibank International PLC. Eight of the original 18 loans have repaid in full since closing in 2007, with a further six incurring losses totalling EUR43.8m (including pending allocations).

KEY RATING DRIVERS

The downgrades of the class A, B and C notes reflect the likelihood of a bond maturity default in April 2017. Fitch considers the class D, E and F notes to be in default given interest is fully or partly non-accruing (corresponding to principal deficiencies recorded for each). The REs take into consideration recoveries after bond maturity, including the expected full repayment of the French Signac loan (subject to a safeguard proceedings).

Since the last rating action in July 2015, three loans have repaid (Cluster 1 and 4&5 in full; Cluster 2 with a loss, as anticipated). The EUR15.5m Epic Horse loan remains on the verge of being written off as no collateral remains, while EUR18.9m Epic Rhino has been resolved with a EUR16.4m loss.

The largest loan, EUR144m Sunrise/Treveria II, is a syndicated facility with 50% securitised in EMC VI and 50% in DECO 10 - Pan-Europe 4 p. l.c. The loan is currently secured on 32 mixed use properties located across Germany (16 assets have been sold since closing, including six over the last 12 months). As per the latest investor report, 19 assets have had notarised sales, the purchase price of which is now expected to be paid in two stages: proceeds from the sale of 9 assets are to be paid on the July 2016 IPD whereas proceeds from the remaining 10 assets are to be paid on the IPD in April 2017. However, around 39% of the proceeds are scheduled to be paid very close to bond maturity, adding to the risk of maturity default. Fitch expects a moderate loss.

The courts in France have provided clarity regarding the preferred exit for the EUR48.4m Signac loan, by setting out an amended repayment schedule. Following various minor instalments, only EUR3.1m is scheduled to be repaid prior to bond maturity. Full repayment is expected (in 2018) from sale of the underlying asset, a five storey office building located in Paris. This improved visibility is a driver for the improvement in REs, supporting the likelihood of the class A and B notes being redeemed after legal maturity.

The EUR7.9m Henderson Bergen/EUR19.9m Henderson Staples loans remain in special servicing. A standstill agreement granting the borrowers more time to sell the remaining three assets is set to expire this month. A final extension may be possible, depending on sales progress as two other assets have been sold since the last rating action. Either way, Fitch expects a significant loss given negative equity likely applies to these loans.

RATING SENSITIVITIES

All outstanding class A, B and C notes will be downgraded to 'Dsf' at bond maturity in April 2017. All ratings will then be withdrawn.

Fitch expects 'Bsf' recoveries of EUR121m (post bond maturity).

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION

The information below was used in the analysis.

-Transaction reporting provided by Citibank, N. A., London Branch as at end-April 2016

-Transaction reporting provided by Situs Asset Management as at end-April 2016