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NEW FITCH REPORT DESCRIBES ASSET-BACKED CP'S NEW LOOK

 NEW YORK, May 10 /PRNewswire/ -- A new Fitch report, "Asset-Backed CP's New Look," comments on the shift by some asset-backed commercial paper conduits away from traditional "bank" structures toward the use of structures that rely significantly on the credit quality of the assets themselves.
 The report describes the methodology for rating conduits, including determining the required amounts of credit and liquidity coverage and Fitch's view of reserves provided by individual sellers to cover credit losses. Often these reserves are used as the first layer of credit enhancement ahead of protection provided by external sources. The report outlines specific scenarios under which credit for these reserves may be given.
 CP conduits traditionally relied on sponsoring banks to cover credit risk, including dilution, as well as liquidity risk. Specifically, sponsoring banks provided liquidity or asset purchase facilities obligating them to advance funds to the conduit to pay maturing CP in practically all events. As a result, ratings of these programs were based on those of the banks and, therefore, could not be higher than the sponsoring banks' ratings.
 Many programs now are structured to separate credit risk from liquidity risk. Under this approach, banks provide a "true liquidity" facility to cover liquidity risk, while the assets' credit risk is covered by a separate credit enhancement, such as a cash collateral account, surety bond, or letter of credit. Separating credit and liquidity risks reduces capital charges for liquidity banks, making it more attractive for them to offer such facilities. It can also, in limited circumstances, allow Fitch to rely on receivable collections for some liquidity.
 -0- 5/10/93
 /CONTACT: Gracen Fraser, 212-908-0520; or J. Douglas Murray, 212-908-0518; or Kathleen Cully, 212-908-0626, all of Fitch. For the complete report call Market Services at 1-800-75-FITCH/


CO: ST: New York IN: FIN SU:

SB -- NY065 -- 6508 05/10/93 12:40 EDT
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Publication:PR Newswire
Date:May 10, 1993
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