OREANDA-NEWS. This commentary replaces the version published earlier today by removing reference to potential rental growth.

Fitch Ratings has affirmed Intu Metrocentre Finance plc's GBP485m fixed rate notes due November 2028 (ISIN: XS0994934965) at 'Asf' with a Stable Outlook.

The transaction is the securitisation of a GBP485m interest-only commercial mortgage loan secured by Intu Metrocentre, a super-regional shopping centre located 30 minutes from central Newcastle, as well as an adjacent retail park.


The affirmation reflects stable asset performance, as evidenced by rental growth, a reduction in the loan-to-value ratio (LTV) and the successful completion of the Qube 2 extension project.

Since Fitch's last rating action, passing rent has increased to GBP50.3m from GBP49.5m, mainly due to a return to full trading by the food court in the recently refurbished Qube 2 section of the centre. However, this still includes rent from BHS, which was recently forced into administration. BHS is the fourth largest tenant, accounting for more than 2.5% of total rent. In Fitch's view, after the initial void and rent-free concessions offered to attract new occupiers have elapsed, the impact on the transaction from the BHS default will be minimal in the long term. There may even be upside if new tenants can be signed at or close to current market rent.

The LTV has reduced to 51.1% from 52.4% one year ago as a result of the appreciation in value of the shopping centre property - despite the adjoining retail park (7% of total value) experiencing a market value decline since last year from GBP63.1m down to GBP62m. The main shopping centre is under-rented, but the retail park is over-rented, indicating that demand for this big box space can be volatile.

The transaction continues to benefit from a diverse, granular income stream with an unexpired lease term of 13.4 years. Historical interest coverage exceeds 2.0x, which is well ahead of the 1.40x cash trap trigger and the 1.25x default trigger.


A significant shift in consumer demand away from the retail experience offered by shopping centres could lead to higher vacancy and would have a detrimental effect on the performance of the collateral, prompting negative rating action.

Fitch's 'Bsf' LTV is 65%.


No third party due diligence was provided or reviewed in relation to this rating action.


Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis.

Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

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.


A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report (see Intu Metrocentre Finance plc - Appendix dated 20 November 2013) In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website.


The information below was used in the analysis.

-Transaction reporting provided by Intu as of 31 December 2015