DBRS Confirms All Classes of Taurus CMBS (Pan-Europe) 2007-1 Limited

DBRS Ratings GmbH (DBRS) took the following rating actions on the Commercial Mortgage-Backed Floating Notes Due February 2020 issued by Taurus CMBS (Pan-Europe) 2007-1 Limited (the Issuer):

-- Class B confirmed at B (sf)
-- Class C confirmed at CCC (sf)
-- Class D confirmed at C (sf)

DBRS also removed its Interest in Arrears designation previously assigned to the Class B notes as it no longer carries any interest shortfall amount since the November 2018 interest payment date. The rating of the Class B notes now carries a Stable trend. The Class C and D notes have interest in arrears and their ratings do not carry any trends.

The confirmation of the notes is due to the deleveraging of the only remaining loan, the Fishman JEC loan, through the disposal of properties with a loan-to-value ratio decreasing to 68.6% as of August 2019 reporting from a high of 100.9%, according to the August 2016 servicing report.

As of the August 2019 servicer report, the transaction’s outstanding balance was EUR 49.9 million, representing a 90.9% paydown of the notes since issuance. The Fishman JEC loan was transferred to special servicing in May 2014, following the borrower’s initiation of safeguard proceedings, which were accepted by the French courts in September 2015. Expected recoveries on the notes are generally higher than what is indictive of their rating levels; however, due to the extension of the loan maturity to December 2020 (as part of the Safeguard proceedings), the repayment of the notes before the notes’ final legal maturity in February 2020 is fully dependent on the special servicer successfully disposing the remaining assets by the February 2020 final legal maturity. DBRS continues to monitor the progress of the special servicer to successfully dispose of the remaining assets and the subsequent repayment of the remaining notes at each interest payment date on or before final legal maturity.

At issuance, the loan was secured by 20 office and industrial properties located throughout France. As of the August 2019 investor report, seven assets remain to be disposed of before the loan repayment date of December 2020. The sale of the Vitrolles asset has been agreed upon according to the servicer and was to be finalised in July 2019. This, however, has now been postponed until October 2019. If the sale of the Vitrolles asset goes through at or near market value (MV) (EUR 11.6 million, as of June 2017 valuation) it will significantly pay down the remainder of the Class B notes (EUR 8.0 million). The Thales portfolio, which contains three assets located in Meru, Cholet and Brest was originally scheduled to be sold in Q3 2018; however, it appears that their lease is still holding over. The lease originally expired in May 2018 and was scheduled to roll into automatic six-month leases at expiration. The Thales portfolio represents EUR 42.5 million (58.4% of MV) or 85.2% of the remaining loan balance and likely a sale of the portfolio would represent a significant paydown of the remaining notes. The sale of the Limonest asset was also postponed after the main tenant gave notice to vacate in August 2018. A new tenant in October 2018 signed a new lease for 227 square metres and an additional tenant (a school) signed 1,222 square metres (sqm) for the start of 13 May 2019, with an additional 800 sqm being currently negotiated with a French bank. This represents approximately 24.7% of the total Net Lettable Area to have recently signed, assuming the French bank lease closes as agreed upon. The property has a value of EUR 17.5 million (24.0% of MV). The remaining two assets (the Onet le Chateau and Tulle assets) combine for a total of only 1.8% of remaining MV.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “European CMBS Rating and Surveillance Methodology”.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of the principal methodology.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release.

These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: https://www.dbrs.com/research/333487/rating-sovereign-governments.

The sources of data and information used for these ratings include Link Asset Services.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating, DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 22 August 2018, when the Class B notes were upgraded to B (sf) from CCC (sf) and the Class C and D notes were confirmed at CCC (sf) and C (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Christopher Horst.

Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

Class B Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of B (sf)
-- 20% decline in DBRS NCF, expected rating of B (sf)

Class C Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of CCC (sf)
-- 20% decline in DBRS NCF, expected rating of CCC (sf)

Class D Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of C (sf)
-- 20% decline in DBRS NCF, expected rating of C (sf)

For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.

Lead Analyst: Christopher Horst, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 2 July 2007

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

-- European CMBS Rating and Surveillance Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.