Wide Variation in Global ABS Performance; Outlook Mixed
Fitch Ratings-London/New York/Hong Kong-14 August 2008: Fitch Ratings says in a special report published today that the outlook for global asset-backed securitisations (ABS) varies for the rest of this year and early 2009, following significant difference seen in the rating performance between mortgage and non-mortgage ABS.
Fitch says global ABS performance weakened considerably in H108 and through 2007, driven by sub-prime RMBS, which has historically been incorporated in global ABS transition studies. Excluding the sub-prime residential mortgage sector, performance in global ABS was positive in 2007, with upgrades far outpacing downgrades.
"Last year saw 425 upgrades and 2,934 downgrades for global ABS, resulting in an upgrade-to-downgrade ratio of 0.14-to-1, compared with 1.27-to-1 for 2006. Downgrades occurred at nearly every rating level," says Stephanie Mah, Senior Director in Fitch's Credit Markets Research Group.
"Outlooks on non-mortgage ABS vary from Stable to Negative for the remainder of 2008 and for early 2009, depending on sector," says Rodney Pelletier, Managing Director in Fitch's European Structured Finance Group.
Consumer transactions backed by credit card receivables, and transactions originated in Spain and Italy, may experience increases in defaults as consumer financial health deteriorates. In commercial transactions, aircraft finance may experience a downturn in performance due to persistent high oil prices. In addition, small- and medium-sized enterprises (SMEs) involved in equipment leasing and loan transactions will also likely experience diminished performance. The rating Outlook for the sub-prime mortgage sector remains Negative.
US-based transactions provided the bulk of ratings actions during H108 and 2007, including most downgrades; however, excluding sub-prime mortgage ABS, movements provides a more varied, positive picture. According to Kevin Duignan, Managing Director in Fitch's SF Group and Head of US ABS, "US consumer and commercial ABS rating performance has been remarkably stable in 2008 to date. However, we expect the pace of upgrades to slow and downgrades to quicken over the next six months as the economy continues to soften."
The study increases transparency over previous annual updates in that it provides for the first time more specific detailed analysis and commentary on the ABS sector in the US, Europe and Asia Pacific jurisdictions. It also provides an update on Fitch's outlook for each of these sectors. The report, entitled "2007 Global ABS Bond Transition and Default Study and 2008 Performance Outlook", is available on the agency's public website, www.fitchratings.com.
Contact: Renaud Untereiner, London, Tel: +44 20 7664 0059; Rodney Pelletier, +44 20 7417 6252; Stephanie Mah, New York, +1 212 908 0884; Kevin D'Albert, +1 212 908 0823; Alison Ho, Hong Kong, +852 2263 9937.
Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364; Sandro Scenga, New York, Tel: +1 212-908-0278; Shivani Sundralingam, Singapore, Tel: + 65 6796 7215.