Bangkok--4 Sep--Fitch Ratings
Fitch Ratings said today that the majority of rating Outlooks are Stable for Fitch-rated structured finance (SF) tranches within Asia Pacific.
"Ratings performance is expected to remain largely stable for asset classes across the Asia Pacific region as indicated by the 80% of tranches with Stable Outlooks", says Alison Ho, Director and Head of Fitch's Asia-Pacific SF Performance Analytics team. "However, more Japanese CMBS tranches are expected to be assigned Negative Outlooks once the current review of Japanese large loan CMBS is completed."
Fitch introduced outlooks to SF ratings in Asia Pacific in June 2008 and since that time has assigned outlooks to over 80% of eligible ratings. "The outlooks have been successful in indicating the direction of ratings movements of the medium term," commented Ben McCarthy, Head of Asia Pacific SF. "They also ensure all our ratings are forward looking and take into account expected market conditions."
Most Japanese CMBS tranches have no Outlook assigned at present, as they are on Rating Watch Negative (RWN) pending a review of collateral values (see Fitch's press release titled "Japanese CMBS' Default of Loans Maturing in H109 Reach 53%; Sector Placed on Watch Negative", published 13 July 2009 for further details). Once the RWNs are resolved, it is anticipated that a significant number of Negative Outlooks will be assigned, especially to junior bonds, which will likely change the 80:20 split between Stable and Negative Outlooks in Japan as well as the wider Asia Pacific region.
In Australia, most Negative Outlooks on prime RMBS tranches are due to rating actions on lenders' mortgage insurance providers. Similarly in India, negative rating actions on underlying obligors have impacted single loan sell down transactions and led to Negative Outlooks in this sub-sector.
Within the CDO sector, there is a marked difference between sub-sectors; synthetic corporate CDOs and junior tranches of Asian CLOs are being assigned Negative Outlooks while senior tranches from bank balance sheet collateralised loan obligations have Stable Outlooks.
Most tranches in transactions backed by assets in non-Japan Asia have Stable Outlooks. The exceptions are five ABS tranches, one CMBS tranche and two RMBS tranches. The Negative Outlooks assigned to the ABS tranches include two backed by credit card receivables in Singapore, one by Thai credit card receivables and another one from a Thai auto loan transaction. The single tranche from one Korean ABS transaction also has a Negative Outlook assigned, following a rating action on The Korea Development Bank ('A+'/'F1'/Negative Outlook), to which the ratings are linked. On the CMBS front, one tranche backed by property in Taiwan was assigned a Negative Outlook, while two Korean RMBS tranches have Positive Outlooks assigned, reflecting the anticipated growth in credit enhancement levels which is expected to outpace any deterioration in asset performance.
Full details can be found in the report "Asia Pacific Structured Finance Outlooks - One Year On".
Rating Outlooks have been published for all newly issued APAC SF tranches since June 2008, and concurrently with rating actions for tranches issued prior to June 2008. Unlike a Rating Watch which notifies investors that there is a reasonable probability of a rating change in the short term as a result of a specific event, rating outlooks indicate the likely direction of any rating change over a one- to two-year period.
Contacts: Alison Ho, Hong Kong, +852 2263 9937; Ben McCarthy, Sydney, +61 2 8256 0388.
Media Relations: Lisa Lim, Singapore, Tel: +65 6796 7214, Email: [email protected]; Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email: [email protected].
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.