OREANDA-NEWS. Fitch Ratings has upgraded Telereal Securitisation PLC's (Telereal) class B and C notes and affirmed the others as follows:

GBP212.6m class A-3 notes due 2033 (XS0139445471) affirmed at 'AAsf'; Outlook Stable

GBP363.1m class A-4 notes due 2033 (XS0139446362) affirmed at 'AAsf'; Outlook Stable

GBP264.3m class A-5 notes due 2033 (XS0186854930) affirmed at 'AAsf'; Outlook Stable

GBP100m class A-6 notes due 2033 (XS0186855077) affirmed at 'AAsf'; Outlook Stable

GBP57.7m class A-7 notes due 2033 (XS0274201762) affirmed at 'AAsf'; Outlook Stable

GBP145.4m class A-8 notes due 2033 (XS0274204865) affirmed at 'AAsf'; Outlook Stable

GBP215m class B-2 notes due 2033 (XS0139654635) upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable

GBP35m class B-3 notes due 2033 (XS0140277772) upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable

GBP294.2m class B-4 notes due 2033 (XS0186855150) upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable

GBP113.9m class B-5 notes due 2033 (XS0186855234) upgraded to 'BBB+sf'; Outlook Stable from 'BBBsf' Outlook Positive

GBP195m class B-6 notes due 2033 (XS0274208007) upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable

GBP193.4m class B-7 notes due 2033 (XS0275282878) upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable

GBP128.3m class C-1 notes due 2033 (XS0275279064) upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable

GBP58m class C-2 notes due 2033 (XS0275282282) upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable

Telereal Securitisation PLC is a securitisation of a fully-amortising loan secured by rental cash flows derived from a portfolio of operational properties occupied by British Telecommunications plc (BT; BBB+/Stable) and located throughout the UK.

KEY RATING DRIVERS

The upgrade of the B and C notes follows a similar rating action on BT (see "Fitch Upgrades BT to 'BBB+'; Outlook Stable" dated 4 February 2016 at www. fitchratings. com). The affirmation of the class A notes reflects Fitch's view of the adequacy of vacant possession value (VPV) of the underlying properties in a 'AAsf' rating stress.

The loan is secured by 5,373 assets, down from 5,375 at the time of Fitch's last rating action. The two properties were sold at a premium to their 2011 VPV.

In its tenant default scenarios, Fitch believes alternative uses (eg residential) are available as much of the portfolio occupies urban space with high land value (70% by value is in London and the south east of England). While likely to offer overall lower value, Fitch assumes the portfolio remains in its current use, given the public interest in preserving the UK's fixed line telecoms infrastructure. Fitch expects that an alternative tenant would have rent set under arbitration in line with industrial properties. Current passing rent across the portfolio is generally lower than local prime industrial rents (according to Cushman and Wakefield data). This headroom provides some cushion in case of tenant default.

If tenant default occurs sooner in the life of the notes, the potential for depreciation and amortisation, which offset each other in their effect on value, will be relatively low (and vice versa). With portfolio quality viewed as broadly average, given their senior ranking and modest leverage (45.2% LTV based on the 2011 VPV) the class A notes would stand a very high chance of being repaid in full in case BT defaulted, supporting the 'AAsf' rating.

RATING SENSITIVITIES

Any rating action on BT would lead to a corresponding change in the ratings of the class B and C notes. The rating of the class A notes is sensitive to drivers of long-term occupational demand for the specialised properties comprising the pool, which depends on, among other things, technological developments, the telecommunications regulatory environment in the UK as well as alternative uses of the properties.

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.

Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.

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 sources of information used to assess these ratings were the issuer, servicer, and periodic cash management and servicer reports.