Fitch Remains Cautious on U.S. Term ABS for Remainder of 2005.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- While it appears to be a continued smooth ride for the majority of U.S. term asset-backed securities Asset-backed security A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate. asset-backed security A debt security collateralized by specific assets. , certain sectors bear closer scrutiny and caution, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. in its midyear review and outlook for the second half of 2005. Overall, stable collateral performance and steadily improving credit enhancement Credit Enhancement A method whereby a company attempts to improve its debt or credit worthiness. Notes: Credit enhancements take many different forms. An example of a credit enhancement would be conversion rights added on to a debt instrument in order to lower the issuing has been an asset for the prime auto and equipment lease ABS sector. 'Despite improvements, Fitch remains guarded on various subprime ABS sectors due to mounting consumer debt and reload (1) To load a program from disk into memory once again in order to run it. Reload is entirely different than reinstall. Reinstall means that you have to run the install program from a CD-ROM or floppy disk and perform the installation procedure over again. risk in a rising rate environment and the impact this will have on underwriting standards,' said Kevin D'Albert, Director, Fitch Ratings. The short- and long-term effects of the recently passed bankruptcy reform legislation, along with rising rates, and its potential impact on underwriting standards make subprime credit card ABS an area of caution for Fitch. In the student loan arena, reauthorization and budget issues as well as competition and tiering in the private sector will also be monitored closely. On the plus side, continued strength in consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. and residential home building has and will continue to reinforce positive rating performance for many commercial ABS sectors, most notably equipment lease ABS. Although showing improvement, the aircraft finance and franchise loan sectors remain under pressure and at risk for possible future downgrades. In the retail auto sector, stabilizing wholesale vehicle prices, along with consistent underwriting and servicing of portfolios have contributed to stable-to-improving collateral performance allowing transactions to build credit enhancement. While historically having displayed strong credit performance, D'Albert said that 'down the road, dealer floorplan ABS could be negatively affected in a declining sales environment.' Fitch has issued 136 downgrades compared to 30 upgrades for ABS through June of this year, with franchise loan ABS (87) taking up a sizable piece of the downgrade activity and prime auto ABS (23) accounting for most of the rating upgrades. 'Midyear 2005 Term ABS Recap and Outlook' is available on the Fitch Ratings web site at www.fitchratings.com. Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies, and relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from this site, at all times. This document will remain on the public site for seven days. |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion