Fitch: Term ABS Continues To Show Signs of Weakness Through 2Q'03.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 6, 2003

Term asset-backed securities (ABS) collateral continues to show signs of weakness, but performance deterioration in key sectors appears to be decelerating, according to a new report by Fitch Ratings. Excluding tobacco settlement transactions, term ABS rating volatility held up reasonably well in the second quarter of 2003 despite certain pockets of risk.

Fitch maintains its negative performance outlook for the subprime credit card and auto sectors as delinquencies and defaults are expected to remain at elevated levels due to the jobless post-recessionary environment and pressure on the consumer. In addition, Fitch maintains its negative outlook for future rating volatility in the aircraft, franchise, and small business loan sectors.

As a percentage of outstanding ratings, second-quarter negative rating actions in Fitch term ABS surged to 12.25% from 1.23% in the first quarter due to the multiple actions taken on the tobacco settlement bonds. The transition rate for all other non-mortgage, non credit product term ABS assets actually slowed in the second quarter compared to the first quarter of 2003. The upgrade rate over the same period fell to 0.19% from 0.28%.

Greater regulatory presence, intervention with issuers and securitizations, certain subprime collateral and role of third parties in the face of declining seller/servicer strength, continue to be areas of concern in 2003 for the ABS market.

The new Fitch report also includes performance commentary, issuer and asset class specific concerns and outlooks for ratings volatility by sector.

The new report titled 'Second-Quarter 2003 Term ABS Recap and Outlook' is available on Fitch's web site at 'www.fitchratings.com' by selecting 'special reports' corresponding with the 'ABS sector' or by contacting the Ratings Desk at 1-800-893-4824.