LONDON, Feb. 14 /PRNewswire/ -- Despite a significant growth in the number
of closings and a three-fold increase in rating actions in 2001 on European
structured finance issues, the transition rates analyzed in a report published
today by Standard & Poor's Structured Finance Ratings group in Europe
demonstrate the continuing stability of ratings in these transactions.
The study incorporates rating transitions of all of Standard & Poor's
European structured finance ratings. It includes, therefore, all asset-backed
securities (ABS) transactions -- both synthetic and cash -- and repackaged
transactions (repacks). The report's principal focus is, however, on the
transitional behavior of European ABS.
The report builds and extends on the themes of the group's previously
published transition study, which took account of the period from 1987 until
the first half of 2000. The new report therefore incorporates any further
developments that emerged over the subsequent 18-month period.
Simon Collingridge, director of European surveillance at Standard & Poor's
Structured Finance Ratings group in Europe, who authored the report, noted
that many of the themes from the previous report still remain intact.
"Despite the growth and increasing diversity of the European ABS market,
no European ABS transaction rated by Standard & Poor's has defaulted since the
market's inception," he said. "However, downgrades exceeded upgrades in 2001,
in contrast with 2000." He added that the number of ABS classes downgraded in
2001 was the highest since 1992, when the majority were caused by the
downgrade of U.K. insurers providing credit enhancement to U.K. RMBS
issuances.
"The period since the last study saw the first downgrades of European ABS
resulting from deterioration in collateral performance, the majority of ABS
downgrades affected CDOs (collateralized debt obligations), including CBOs and
CLOs (bond and loan obligations)," he said. "However, on the evidence of the
small number of downgrades to date, CLOs have remained almost entirely
unaffected, because they are generally backed by large, well-diversified pools
of corporate loans. Only one revolving pool CLO transaction was subject to
downward rating action in 2001, while one was also upgraded."
Going forward, Mr. Collingridge added that it is likely that there will be
further downgrades of CBO/CLOs as they are affected by negative rating
movements in their underlying assets.
In contrast to the potential volatility in CDO land, the outlook for the
European residential mortgage-backed securities (RMBS) market remains
positive, with the likelihood of further upgrades on the back of strong
collateral performance. Several RMBS transactions were upgraded in 2001, and
the first commercial mortgage backed-securities (CMBS) transaction was also
upgraded following on strong collateral performance.
As markets continue to mature, it is likely that there will be further
performance-related upgrades across other asset areas. It is also likely that
in 2002 there will still not have been a large enough volume of lower-rated
classes of sufficient maturity for a truly clear picture of their transition
behavior to emerge, Mr. Collingridge concluded.
"Overall, it is expected that the relative stability of ratings on
European ABS will continue to be the overriding feature," he said.
A copy of Standard & Poor's complete study is available on RatingsDirect,
Standard & Poor's Web-based credit analysis system, at
http://www.ratingsdirect.com. The report is also available on Standard &
Poor's Ratings Services Web site at http://www.standardandpoors.com. Under
Forum, select Ratings Commentaries, then Structured Finance.
SOURCE Standard & Poor's
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Related links:
http://www.standardandpoors.com/ratings
CONTACT:
Simon Collingridge, +44-20-7826-3841, or Kurt
Sampson, +44-20-7826-3535, both of Standard & Poor's
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