OREANDA-NEWS. Fitch Ratings has affirmed Premiertel plc's CMBS notes as follows:

GBP71,672,000 Class A (XS0180245515) due May 2029: affirmed at 'AAsf'; Outlook Stable
GBP201,535,643 Class B (XS0180245945) due May 2032: affirmed at 'BBsf'; Outlook Stable

Premiertel plc is a securitisation of rental cash flows from a portfolio of five office properties located throughout the UK (two in England, two in Scotland and one in Northern Ireland) fully let to British Telecommunications plc (BT; BBB/Positive/F2).

KEY RATING DRIVERS
The affirmation of the class A notes reflects the stable performance of the UK commercial real estate market segments corresponding to the underlying collateral. The assets' vacant possession value provides adequate coverage, alongside an available liquidity facility, to support the class A notes' high investment-grade rating. The notes are not being repaid as fast as originally expected, which is reflected in a cumulative total amortisation shortfall (versus schedule) of GBP736,552 at the February 2015 interest payment date (IPD), up from GBP366,975 at the same period a year ago.

Although the class B notes may not be repaid in full from contracted income derived under the long lease to BT, Fitch expects the borrower nevertheless to repay its indebtedness. This view has not changed materially since the last rating action, warranting an affirmation.

The shortfall is driven by higher transaction costs arising from standby drawdowns of the liquidity facility. The longer this added cost is being borne, the more likely the associated drag on amortisation will leave a portion of the class B notes unpaid at the expiry of the lease in 2032. This exposes class B investors to risks associated with the borrower's ability and willingness to refinance the portfolio in time for legal maturity in 2032 (a few months before lease expiry).

As there is no tail period, Fitch analyses refinancing risk in relation to the sufficiency of estimated future equity in the run-up to bond maturity, in accordance with its loan rating approach. While any unpaid debt should be limited (provided the BBB lease performs) reliance on unenforceable financial incentives currently constrains the class B notes from being rated investment grade.

RATING SENSITIVITIES
A change in property market conditions might cause a change in the rating of the class A notes. Also, provided BT performs, over time these notes will deleverage further, which may lead to an upgrade. As the rating of the class B notes is capped at the rating of BT, a change in the rating of BT may lead to a change in the rating of the class B notes.