OREANDA-NEWS. Fitch Ratings has upgraded Temese Funding 1 plc's class B and D notes and affirmed the class A and C notes as follows:

GBP55.1 class A notes due November 2021: affirmed at 'AAAsf'; Stable Outlook
GBP15.8m class B notes due November 2021: upgraded to 'AAAsf' from 'AA+sf'; Stable Outlook
GBP11.2m class C notes due November 2021: affirmed at 'Asf'; Stable Outlook
GBP9.2m class D notes due November 2021: upgraded to 'Asf' from 'BBB+sf'; Stable Outlook

The transaction is a securitisation of UK equipment lease receivables originated by Investec Asset Finance plc (IAF), a wholly owned subsidiary of Investec Bank plc (BBB-/Stable/F3), and granted to small/medium-size companies, corporates and public bodies. The transaction is static and the notes amortise sequentially.

KEY RATING DRIVERS
The upgrade of the class B and D notes reflects an increase in available credit enhancement (CE) as a result of rapid portfolio amortisation since issue in November 2013. In particular, CE for the class A notes has risen to 46.6% from 14.8%; class B to 19% from 8.8%, class C to 16.6% from 4.5% and class D to 6.4% from 1%. The affirmation of the class C notes reflects that although available CE has increased, the liquidity reserve is only available to support timely interest payments on the class A and B notes, hence limiting the rating on the class C notes to 'Asf'.

As of the August 2015 reporting date, the portfolio has amortised to GBP90.3m from the original amount of GBP264m in October 2013. The portfolio's composition has remained largely unchanged since closing.

Arrears have remained low and stable since closing, with the exception of one uptick in January 2014 that has subsequently reversed. Arrears stood at 0.38% as of end-August 2015.

Reported defaults (1.8% of initial pool balance) and recoveries (45.2% of total defaults) have outperformed Fitch's expectations to date. We have revised the lifetime default base case for the transaction to 2.5%, from 3.75%, based on a remaining lifetime assumption of 4.5%.

The transaction benefits from an appointed back-up servicer (Virtual Lease Services Ltd) which along with the liquidity reserve, adequately mitigates potential servicer discontinuity and payment interruption risk within the transaction.

RATING SENSITIVITIES
Expected impact upon the note rating of increased defaults and reduced recoveries:
Class A/B/C/D: Current Rating: 'AAAsf'/'AAAsf'/'Asf'/'Asf'

Increase base case defaults by 25%: 'AAAsf'/AAAsf'/'Asf'/'Asf'
Reduce base case recoveries by 25%: 'AAAsf'/AAAsf'/'Asf'/'Asf'

Initial Rating Sensitivities are further described in the New Issue Report published on 14 November 2013.

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.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

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.