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Fitch: Subprime, Consumer, Corporate Challenges Will Test U.S. Term ABS in 2006.

NEW YORK -- The impact of higher interest rates and an uncertain housing market will likely challenge the stability of the U.S. subprime consumer in 2006, according to a new report by Fitch Ratings. In addition, the corporate woes of certain U.S. auto manufacturers will put pressure on auto-related ABS sectors, particularly dealer floorplan and rental fleet.

Fitch remains guarded in its outlook for both subprime credit card and auto loan ABS despite recent improvements. Fitch is concerned that higher interest rates and slower home price growth could amplify losses in these segments.

In the credit card sector mid/subprime borrowers may be forced to draw on previously unused revolving credit lines at a time when household leverage is near all time highs. In addition, these conditions may also serve to intensify competition among lenders.

In the auto ABS arena, two key areas being watched in 2006 are dealer floorplan and rental fleet ABS, both of which are expected to come under performance pressure due to industry challenges and exposure to auto manufacturers. These same corporate pressures could negatively impact loss severity in all auto-related ABS transactions as certain manufacturers continue their high level of incentives.

Fitch's 'Global Structured Finance: 2006 Outlook and 2005 Review' includes asset performance and rating volatility forecasts for the global ABS, CMBS, RMBS and CDOs sectors in 2006, along with how broader macroeconomic trends will influence the structured finance markets in the U.S. and overseas, and an overview of rating performance and credit migration trends over the past year. The report is available on the Fitch Ratings web site at www.fitchratings.com.

Fitch Alert Surveillance Tracker (FASTracker), is a web-based portfolio management tool that allows investors to actively monitor through customized alerts how new research and other performance data are affecting bonds in the ABS, CMBS, RMBS and CDO sectors. To learn more about FASTracker, contact Fitch's sales department in New York at usaclientservices@fitchratings.com or +1-212-908-0800; in Europe, please contact Elizabeth McGlogan at elizabeth.mcglogan@fitchratings.com or +44 (0)20 7417 6309; in Asia, please contact client services at asiaclient.services@fitchratings.com, or +65 2263 9999.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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Publication:Business Wire
Date:Dec 6, 2005
Words:421
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