OREANDA-NEWS. Fitch Ratings has affirmed House of Europe Funding IV PLC's ratings as follows:

EUR149.8m Class A1 notes (ISIN XS0228470588): affirmed at 'BBsf', Outlook Stable
EUR130m Class A2 notes (ISIN XS0228472873): affirmed at 'CCsf'
EUR62.5m Class B notes (ISIN XS0228474572): affirmed at 'Csf'
EUR5m Class C notes (ISIN XS022847572): affirmed at 'Csf'
EUR49m Class D notes (ISIN XS0228476197): affirmed at 'Csf'
EUR8.5m Class E notes (ISIN XS0228477161): affirmed at 'Csf'

House of Europe Funding IV plc is a managed cash arbitrage securitisation of structured finance assets, primarily RMBS and CMBS. The portfolio is managed by Collineo Asset Management GmbH. The reinvestment period ended in December 2010.

KEY RATING DRIVERS
The class A-1 note has paid down EUR72.4m over the last 12 months and currently represents 20% of the initial balance. Credit enhancement rose to 35% from 26% during the same period. Eight assets have amortised in full. Remaining principal proceeds are derived from partial pay-downs, cash from the previous review year and EUR1.7m of recoveries.

As per the report dated 15 July 2015 the portfolio includes EUR67.3m of defaulted assets with a market value of EUR23.6m. The remaining performing assets amount to EUR230.73m, leaving the class A2 notes and below under-collaterlised.

A missed interest payment on the class A1 to C notes would constitute an event of default, giving the senior noteholder the right to liquidate the portfolio. Furthermore, principal is only repaid to the class A1 noteholders after interest has been paid in full on the class A1 to C notes. Therefore principal would first be used to pay interest and deferred interest on these tranches. Currently the interest received on the portfolio approximately covers the senior fees and interest due on the class A1 to C notes by a factor of 1.9. Assuming no further defaults Fitch estimates that the structure could absorb a rise in Euribor to 1.31% without relying on principal to cover interest. However, the risk of a missed interest payment on the senior notes prevents an upgrade of the class A1 notes above the current rating.

The weighted average recovery on the defaulted assets has remained broadly, having fallen to 35.16% from 38.63% over the last 12 months. Only 45 assets remain in the portfolio from 41 issuers, leading to an increase in concentration risk. The portfolio is, however, of sound credit quality with 74% of the outstanding balance invested in investment-grade assets. 'AAA'-rated assets alone represent 22.6% of the outstanding balance with 23% in the 'BBB' category and only 11% rated 'CCC' or below.

The aforementioned risks have been accounted for in the current ratings with potential default constraining the class A1 notes. The principal on the class E notes, which are currently deferring interest, is additionally protected by a par balance of EUR6.4m through a zero coupon French government bond. The rating remains 'Csf' as it is unlikely that the deferred interest on the class E notes will be paid.

RATING SENSITIVITIES.
Fitch analysed the impact of further extensions on the expected maturity dates on the ratings of the transaction. The stress considered all underlying assets at their legal maturity date and did not indicate any potential negative rating action.

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.

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 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 15 July 2015
- Transaction reporting provided by Deutsche Bank 15 July 2015