Fitch: Weak Asset Performance to Continue in EMEA Structured Finance
Fitch Ratings-London-26 October 2009: Fitch Ratings says in its latest EMEA Structured Finance Sector Outlook report published today that it expects poor asset performance to continue in most asset classes despite the apparent stabilisation of economic conditions in Europe.
"Fitch remains sceptical that the early signs of economic recovery now evident in most major economies will translate into improved structured finance asset performance in Europe," says Ian Linnell, Head of EMEA Structured Finance at Fitch.
Fitch expects a return to positive economic growth, but at a rate that is weak by historical standards and fragile to further potential shocks.
In the report, Fitch highlights the key performance trends affecting all major structured finance asset classes throughout EMEA. The report also provides changed sector outlooks for the following asset classes:
Belgian RMBS - Asset performance declining and ratings stable. The asset performance was revised to declining from stable/declining.
Belgian RMBS delinquencies remain on the low side and transactions are still performing within Fitch's base case expectations. Nevertheless, Belgium's unemployment rate is expected to increase to a record high of 10.5%, which is driving the negative view on asset performance. Fitch expects transactions to have deleveraged by the time higher defaults arrive, which is why the agency is maintaining its stable outlook on ratings.
CDOs of European SMEs:
Asset performance declining and ratings negative. The asset performance was revised to declining from stable/declining.
SME CDOs are much more dependent on regional economic pressure. Many Spanish SME CDOs are heavily exposed to real estate and construction-related enterprises. In addition, SMEs are likely to experience difficulty in securing alternative sources of credit in the present environment. For the SME sector to improve, both broader economic fundamentals and access to credit would need to strengthen. While seasoning and deleveraging will benefit some SME CDOs, the majority of transactions are expected to remain on an uncertain outlook for the foreseeable future.
Irish RMBS - Asset performance declining and ratings negative. The rating Outlook was revised to Negative from Stable.
Russian Future Flow - Asset performance stable and ratings negative. The rating Outlook was revised to Negative from Stable/Negative.
UK CMBS - Asset performance stable/declining and ratings stable/negative. The asset performance was revised to stable/declining from declining. The rating Outlook was revised to Stable/Negative from Negative.
Pan European CMBS - Asset performance declining and ratings stable/negative. The rating Outlook was revised to Stable/Negative from Negative.
South African CMBS - Asset performance declining and ratings stable/negative. The rating Outlook was revised to Stable/Negative from Stable.
The report, entitled "EMEA Structured Finance Sector Outlook - October 2009", is available on the agency's public website, www.fitchratings.com.
Contacts: Joanne Wong, London, +44 (0) 20 7417 4312; Peter Winning, +44 (0) 20 7682 7492.
Media Relations: Julian Dennison, London, Tel: +44 020 7682 7480, Email: julian.dennison@fitchratings.com; Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: peter.fitzpatrick@fitchratings.com.
Additional information is available at www.fitchratings.com.
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