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March 4, 2008 |
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NEMUS II: Fitch Holds Rating on GBP1.13 Million Class F Notes Fitch Ratings affirmed Nemus II (Arden) p.l.c.'s notes as : -- GBP203.97m Class A (XS0278300487): affirmed at 'AAA', Outlook Stable -- GBP16.55m Class B (XS0278300560): affirmed at 'AAA', Outlook Stable -- GBP11.21m Class C (XS0278300727): affirmed at 'AA', Outlook Stable -- GBP10.14m Class D (XS0278301295): affirmed at 'A', Outlook Stable -- GBP16.81m Class E (XS0278301378): affirmed at 'BBB', Outlook Stable -- GBP1.13m Class F (XS0278301535): affirmed at 'BB', Outlook Stable Nemus is a multi-borrower transaction of six loans secured by 22 properties. All properties are located throughout the UK and Jersey and the transaction closed at end-2006. Since closing the overall rent has slightly increased to GBP20.13m in February 2008 from GBP19.84m. The vacancy rate has been decreasing or has remained constant since closing to currently stand at 0.39%. The deal has also benefited from a loan-to-value (LTV) covenant within the Castle properties loan, which represents 4.3% of the pool. A covenant of 75% became operative on the transaction's second anniversary, resulting in a new valuation of the properties. The properties were valued GBP15.2m on 8 February 2008, up from GBP14.3m at closing in October 2005. This resulted in a LTV of 74.7%, down from 79.2%, making the loan now covenant compliant. In the third year the LTV of the loan should go down to 73% and on the loan's fourth anniversary a final covenant of 70% will be put in place. These LTV reductions should occur through the disposal of assets or further injection of cash by the sponsor. If this does not happen a cash trap should sweep the excess spread until the covenant is compliant. Despite falling commercial property values across the UK, a Fitch study concludes that Nemus has sufficient exit debt yield (EDY) to mitigate refinancing risk, notwithstanding Nemus's high property concentration in the country and valuations based on the property market's peak in 2006/2007 (which Fitch has taken into account in its study). Fitch's study has concluded that loans maturing prior or in 2011 are most at risk from default, and Nemus has only two such loans, the Castle Properties and the Somerfield loans. Even then, their respective EDY are high at 10.95% and 8.5%. |
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