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The following is a press release from Moody's Investors Service: GBP[950.15] million of EMEA CMBS rated London, 29 June 2010 -- Moody's Investors Service has assigned the following provisional long-term rating to the proposed issue of Tesco Property Finance 3 Plc: GBP[950.15] million Secured [_] per cent. Bonds due 13 April 2040, Assigned (P)A3 The transaction represents a true-sale credit-tenant-linked securitisation of one commercial mortgage loan (the "Loan") and is co-arranged by Goldman Sachs International and HSBC Bank plc. The collateral for the Loan is the long leasehold interest in a portfolio of 41 commercial properties located across the United Kingdom. All properties in the portfolio are supermarkets let to Tesco related entities on long term leases. The payments under the occupational leases are guaranteed by Tesco PLC (A3, outlook negative). The provisional rating of the Bonds is based on the (i) creditworthiness of Tesco as tenant and lease guarantor under the occupational leases; (ii) Moody's assessment of the real estate quality and characteristics of the underlying property portfolio; (iii) a detailed analysis of the Loan; (iv) the Borrower and Issuer level inflation rate hedging arrangements; and (v) the legal and structural features of the transaction. This transaction is the fourth capital markets sale and leaseback CMBS transaction brought to the capital markets involving Tesco PLC. The most recent transaction, Tesco Property Finance 2 Plc, closed in September 2009 while another similar transaction, Tesco Property Finance 1 Plc, closed in June 2009. Delamare Finance Plc closed earlier in April 2004. The transaction is similar to the previous two transactions, and especially to Tesco Property Finance 2 Plc considering the Issuer and Borrower/Ownership structure. The key differences include a slightly lower total leverage (based on expected issuance amount) and a more back loaded amortisation profile of the Bonds over the life of the transaction. In addition, in this transaction, the tenant has an option to terminate the occupational leases in September 2020 subject to certain conditions in the lease agreements being fulfilled. Significantly, the tenant can only terminate the leases provided that, among other things, all amounts owing under the Bonds have been repaid by the Issuer. The key strengths of the transaction are: (i) 29-year and [354]-day bondable occupational leases in place which are guaranteed by Tesco PLC (A3, outlook negative); (ii) the above average property quality; and (iii) the amortisation profile of the Bonds resulting in full repayment at maturity in April 2040. Based on the structural transaction features, the rating of the Bonds is closely linked to Moody's long term senior unsecured rating of Tesco PLC. The above strengths are also the main mitigants against (i) the single tenant exposure; (ii) property type concentration (all supermarkets); (iii) the lack of a tail period after the expected maturity of the Bonds; and (iv) the Borrower's flexibility to substitute properties over time. As mentioned above, the tenant has an option to terminate the leases in year 10 of the transaction term; however, such option could not be exercised while the Bonds are still outstanding and could only be exercised by the tenant if all Issuer Secured Obligations have been unconditionally and irrevocably paid or repaid and discharged in full, among other conditions. In the transaction, index-linked lease payments and payments under the inflation swaps allow for full amortisation of the Loan and hence the full amortisation of the Bonds by April 2040. The projected debt service coverage ratio for the Loan is 1.0x during the entire loan term. According to a third-party valuation, the vacant possession value ("VPV") and market value ("MV") of the portfolio are GBP710.1 million and GBP924.0 million, respectively. Based on the day-1 rental value of GBP48.7 million, this implies a weighted average net initial yield of 4.99% based on the MV. The rental values are on average GBP21.3 per square feet (on a gross area basis). Moody's has reviewed the valuations and formed its opinion of the MV of the portfolio as GBP853.1 million taking into account the break option of the leases in September 2020. Moody's Model Value which is used to determine the recoverable property values in a scenario where Tesco would default is based on VPV and is GBP585.3 million. The downward adjustment to the value is driven by certain assumptions including higher property yields and void costs. The resulting loan-to-value ratio based on Moody's VPV day-1 is 162% and 111% based on Moody's MV. Moody's issues provisional ratings in advance of the final sale of securities and these ratings reflect Moody's preliminary credit opinion regarding the transaction only. Upon a conclusive review of the final documentation, Moody's will endeavour to assign a definitive rating to the Bonds. A definitive rating may differ from a provisional rating. The provisional rating for the Bonds addresses the expected loss posed to investors by the legal final maturity. In Moody's opinion, the structure allows for timely payment of interest and ultimate payment of principal at par on, or before, the final legal maturity date. Moody's ratings address only the credit risks associated with the transaction; other non-credit risks have not been addressed but may have significant effect on yield to investors. Moody's analysed and will monitor this transaction using the rating methodology for EMEA CMBS transactions as described in the Rating Methodology report "Update on Moody's Real Estate Analysis for CMBS Transactions in EMEA", June 2005 and "Moody's Updates on its Surveillance Approach for EMEA CMBS", published in March 2009. All can be found on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website. More information can be found in Moody's Pre-Sale Report for this transaction that will be available in due course on its website www.moodys.com. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck. Copyright 2010 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved. CREDIT RATINGS ARE MOODY'S INVESTORS SERVICE, INC.'S ("MIS") CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MIS DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS DO NOT CONSTITUTE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS ARE NOT RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. CREDIT RATINGS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MIS ISSUES ITS CREDIT RATINGS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER (MORE TO FOLLOW) Dow Jones Newswires June 29, 2010 07:33 ET (11:33 GMT)