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

GBP69.6m Class A (XS0180245515) due May 2029: affirmed at 'AAsf'; Outlook Stable
GBP201.5m Class B (XS0180245945) due May 2032: affirmed at 'BBsf'; Outlook Stable

Premiertel plc is a securitisation of a loan financing long-term 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+/Stable/F2).

KEY RATING DRIVERS
The affirmation of the class A notes reflects the stable performance of the underlying real estate as well as the available liquidity. The class B notes (capped at BT's rating) continue to accrue a shortfall against scheduled (deferrable) principal payments in line with Fitch's expectations.

The source of the shortfall is the increase in transaction costs due to fees related to the liquidity facility standby drawing. Fitch does not expect this added cost to be recouped from rental cash flow, leaving a portion of the class B notes at risk of being unpaid at the expiry of the lease in 2032 (also legal maturity). This exposes class B investors to risks associated with the borrower's ability and willingness to refinance its portfolio by that time (there is no tail period).

Fitch considers refinancing risk in relation to the sufficiency of the sponsor's estimated future equity in the vacant possession value (VPV) of the portfolio in the run up to bond maturity. While any unpaid debt should be relatively minor (provided the lease performs in full) reliance on unenforceable financial incentives so far into the future together with the lack of applicable liquidity support for the notes precludes an investment grade rating for the class B notes.

RATING SENSITIVITIES
A weakening in property market conditions could cause a downgrade of the class A notes by reducing VPV. On the other hand, as long as BT performs, the notes will deleverage further, which could lead to an upgrade of the senior class.

As the rating of the class B notes is capped at BT's rating, a severe enough reduction in the tenant's rating may lead to a downgrade of the class B notes. An upgrade of BT may lead to an upgrade of the class B notes, subject to estimated future VPV of the real estate providing sufficient debt coverage i.e. commensurate with at least one category against the breakeven, as per Fitch's loan rating methodology as described in its EMEA CMBS criteria.

Fitch estimates 'Bsf' recovery proceeds of GBP322m.

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.