OREANDA-NEWS. Fitch Ratings has upgraded two tranches of Faxtor ABS 2005-1 B. V. and affirmed others.

Class A-1 floating-rate notes (XS0235143970): affirmed at 'Asf'; Outlook Stable

Class A-2E floating-rate notes (XS0235144358): upgraded to 'BBBsf' from 'BB+sf'; Outlook Stable

Class A-2F fixed-rate notes (XS0235144945): upgraded to 'BBBsf' from 'BB+sf'; Outlook Stable

Class A-3 fixed-rate notes (XS0235146056): affirmed at 'BB-sf'; Outlook Stable

Class A-4 floating-rate notes (XS0235146569): affirmed at 'CCCsf'

Class B floating-rate notes (XS0235147617): affirmed at 'CCsf'

Faxtor ABS 2005-1 B. V. is a securitisation of European structured finance assets of mainly mezzanine quality.

KEY RATING DRIVERS

Rising Credit Enhancement

Over the 12 months to May 2016 continued amortisation of the senior class A-1 note has resulted in the credit enhancement increasing by 13.6% to 91.3% and for the class A-2E and A-2F notes by 10.2% to 70.9%, leading to the upgrades. The class A-1 notes have been paid down by EUR17.8m with an additional EUR0.9m of capitalised interest paid on the class B notes. The transaction currently suffers from negative excess spread and is deferring interest on the junior notes. Currently EUR3.8m of principal proceeds is available for distribution on the next payment date. Credit enhancement for the class A-3 notes rose 6.7% to 50.5%; for the class A-4 notes 3.8% to 33.2% and for the class B notes 2.5% to 20.9% over the same period.

Counterparty Exposure

Following Fitch's downgrade of Deutsche Bank to 'A-' from 'A' on 8 December 2015 the bank is in breach of the 'A'/'F1' account bank trigger in the original transaction documents. No remedial action has been planned; however, the decision to affirm the class A-1 notes at 'A' rather than to downgrade to the counterparty rating of 'A-' follows Fitch's assessment of the materiality of the exposure. The class A-1 notes have 91.3% credit enhancement, which provides ample protection from commingling risk and at only 5.26% outstanding the notes will likely repay within the next payment periods.

As the IDR of a bank does not directly address the probability of a disruption to the bank's operational capacities Fitch judges that payment interruption risk in an 'A' stress environment, for the short risk horizon remaining on the class A-1 notes, is mitigated.

Concentrated Portfolio

The portfolio is concentrated with the top 10 performing obligors representing 62.59% of the portfolio. Additionally the top three performing obligors represent 21.94% of the portfolio and so as part of the sensitivity analysis the top three performing obligors were assumed defaulted, and given zero recovery, to gauge the impact on the ratings. Such a scenario would see up to a five-notch downgrade to the class A-3 and A-4 notes, but no rating impact on all other notes.

The portfolio currently contains 40 performing assets from 33 issuers, with an additional six defaulted assets. One asset, Smile Securitisation Company 2007, defaulted in February 2016. The portfolio distribution is somewhat unchanged over the 12 months to May 2016, with small movements out of the UK and Italy and into the Netherlands, Germany and Spain. The percentage of commercial ABS assets held by the transaction fell 4.92% with a subsequent 3.08% increase in CMBS assets and 1.61% increase in RMBS assets.

RATING SENSITIVITIES

Reducing the recovery rate by 25% for all assets in the portfolio would have no impact on the ratings. Stressing the default rate by 25% or a combination of the two stresses mentioned above would lead to a two-notch downgrade to the class A-3 notes but would not impact the ratings of the other notes.

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.

The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant Fitch groups and/or other rating agencies to assess the asset portfolio information.

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.

-Loan-by-loan data provided by Deutsche Bank as at 31 May 2016

-Transaction reporting provided by Deutsche Bank as at 31 May 2016