OREANDA-NEWS. Fitch Ratings has revised the Outlooks for Cavendish Square Funding plc's junior notes, and affirmed all ratings as follows:

Class A1: affirmed at 'BBBsf'; Outlook Stable

Class A2: affirmed at 'BBsf'; Outlook Stable

Class B: affirmed at 'Bsf'; Outlook revised to Stable from Negative

Class C: affirmed at 'B-sf'; Outlook revised to Stable from Negative

Cavendish Square Funding is a cash arbitrage securitisation of European structured finance assets, mainly mezzanine RMBS, CMBS and commercial ABS assets of speculative-grade quality.

KEY RATING DRIVERS

Stable Portfolio Performance

Portfolio performance has been stable over the last 12 months with minimal changes to the portfolio's characteristics. The reported weighted average rating factor of the performing portfolio - a measure of credit quality - stands at 15.5, up from 14.4 a year ago. Three assets defaulted during the period while one previously defaulted asset was reclassified as performing. Overall, the notional of defaulted assets increased marginally to EUR29.9m from EUR27.4m over the last 12 months.

The portfolio continues to be heavily concentrated in RMBS (91% of the performing portfolio). Fitch maintains a stable outlook on the RMBS sector in Europe.

Prepayments Drive Deleveraging

The class A-1 notes received EUR34.6m of principal proceeds in the last 12 months, causing a build-up of credit enhancement for all rated notes. The deleveraging was driven mainly by prepayments from UK RMBS assets. The addition protection available to the notes is reflected in the revised Outlooks on the junior notes.

Long Expected Life

Fitch based its analysis on a time-to-repayment assumption for the portfolio assets in line with its "Global Surveillance Criteria for Structured Finance CDOs", dated 5 July 2016. Fitch's overall weighted average life assumption for the portfolio is 10.5 years. The long expected portfolio life is driven mainly by the large share of RMBS assets, for which Fitch assumes an expected final payment date 25 years from the issue date.

RATING SENSITIVITIES

A 25% increase in the asset default probability or a 25% reduction in expected recovery rates would not lead to a downgrade of the rated notes.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch 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 affected the rating 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.

The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally

Recognised Statistical Rating Organisations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch 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.

-Investor report dated 30 June 2016 provided by the collateral administrator

-Loan level data dated 30 June 2016 provided by the collateral administrator