Bangkok--26 Nov--Fitch Ratings
Fitch Ratings is in the process of updating its criteria for rating multi-issuer cedulas hipotecarias (CH) transactions. In view of the ongoing global liquidity crisis and demonstrated state intervention and support, the review will incorporate an updated assessment of the liquidity risk that multi-issuer CH investors are exposed to in case of CH issuers defaulting. The agency acknowledges that the potential for widespread bank defaults is presently more limited given direct government support and because targeted liquidity funds have been established. The agency plans to publish its updated criteria in the first quarter of 2009. The rating approach employed by Fitch to rate multi-issuer CH is based on the following factors.
The creditworthiness of the issuing entities (CH issuers), which include savings banks and
credit cooperatives.
- The maintenance of minimum over-collateralization levels, which support the ultimate payment of principal on the multi-issuer CH notes at their legal final maturity.
- The existence of third party liquidity support that ensures the timely payment of interest on the multi-issuer CH notes.
The agency does not plan to modify these principles for rating multi-issuer CH, but rather, review long-standing underlying assumptions.
An area of focus will be the amount of liquidity support needed for stand alone transactions as well as for series within multi-issuance programs to support outstanding multi-issuer CH note ratings. The updated criteria will also address the obligor concentration risk present in these portfolios and acknowledge the support that financial institutions may receive in times of stress.
The existing Fitch criteria employs Issuer Default Ratings (IDR), or mapped equivalents where there is no formal IDR available, as indicators of the default probability of the refinanced CHs. The updated criteria will also aim to recognise a distinct default probability for the CH obligations, wherever sufficient information is made available by participating entities.
This more detailed review may result in rating actions for selected older multi-issuer CH transactions where liquidity facilities may not be sufficient under revised assumptions. Transactions issued since the end of 2007 are unlikely to be affected as they have generally been issued with shorter tenors and larger liquidity support. Since the inception of the multi-issuer CH market in 2001, there has never been a delinquency or default of any underlying refinanced CH.
Fitch will implement the revised assumptions into its ratings 30 days after the publication of the criteria report, after taking into account any risk mitigation that issuers may adopt during this period.
Contacts: Rui J. Pereira, Madrid, Tel: +34 917 025 774; Jeffery Cromartie, London, +44 (0) 207 664 0072; Alessandro Settepani, London, +44 (0) 207 682 7360.
Media Relations: Julian Dennison, London, Tel: +44 020 7682 7480, Email: [email protected].