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Structured Finance

Global Home > Structured Finance

Pre-Crisis Structured Finance Vintages Have Higher ESG Risk

The materiality of environmental, social and governance (ESG) factors on the ratings of global structured finance transactions, reflected by ESG relevance scores (ESG.RS) of '4' or '5', is greater for older vintage structured finance credits. Pre-financial crisis vintages, originated before 2009, are most influenced by negative ESG factors.
 

Highlight Report:
Where ESG Matters for Global SF and CVB Ratings - A Case Study 

Coronavirus to Pressure China's Near-Term Auto-ABS Performance

The 2019 coronavirus (Covid-19) outbreak and strict restrictions implemented for containing it are likely to adversely affect employment rates and disposable incomes in the near term.

 

Related:

 

More on the Coronavirus

Oil and Gas Securitizations, PDP Operating Risk Lower than U.S. Whole Business

Securitizations backed by Proved Developed Producing (PDP) securitizations have a certain degree of operating risk. However, a replacement operator can step in and provide the necessary oversight for cash flow to continue.

Stable Outlook for Chinese RMBS, Auto ABS Ratings in 2020; Pressure from COVID-19

The ratings on Fitch-rated RMBS and auto ABS transactions in China remain stable as we expect the impact of the COVID-19 coronavirus on asset performance to be limited. While delinquencies and defaults could increase and prepayments slow, the strength of the transactions and the fact that current ratings take into account periodic exogenous shocks mean the ratings remain robust despite the potential worsening performance.

Covered Bonds Have Extended Aus, NZ Bank Maturity Profiles

Australian and New Zealand bank liability profiles have lengthened with the increased issuance of longer-dated covered bonds and senior unsecured debt. This has reduced asset and liability mismatches, but we do not expect the lengthening of wholesale bank maturities to continue now that banks have met their stable funding requirements.

Fitch Ratings Appoints New Heads of U.S. RMBS and CLOs

Fitch Ratings is pleased to announce the appointment of Kevin Kendra as its new head of U.S. RMBS and Derek Miller as Fitch's new head of U.S. Structured Credit. Both analysts will report to North American Structured Finance and Covered Bond Group Head Rui Pereira.

Webinar

U.S. Whole Business and Structured Finance Securitizations with Operating Risk: A Comparison of Current Market Transactions

Please join us as our analysts discuss the US Whole Business sector and compare it to other similar securitizations with operating risk.
 

Available On-Demand

outlooks 2020

Global Housing & Mortgage Outlook

Fitch Ratings forecasts subdued home price growth in 2020-2021 due to stretched affordability, more challenging economic growth prospects and macro-prudential measures restricting mortgage eligibility. This is despite falling or very low mortgage rates, insufficient supply in major cities and stable or improved employment levels in most countries.

 

Related Webinars:

  • Risks to Global Housing Markets – What to Watch in 2020 (Europe) – Listen here
  • Risks to Global Housing Markets – What to Watch in 2020 (Asia) – Listen here
  • Risks to Global Housing Markets  – What to Watch in 2020 (North & Latin America) – Listen here
Webinar

Canadian Auto Lease ABS Webinar : BMW Canada Auto Trust (BMWCAT), Series 2020-1

Points covered during the webinar:

  • Overview of Fitch’s North American Auto Lease ABS Rating Criteria
  • Key Collateral Highlights
  • Credit Enhancement / Structure
  • BMW Canada’s Portfolio / Securitization Performance
  • Credit and Residual Analysis / Cash Flow Modeling

Listen On Demand

outlooks 2020

2020 Outlook Broadly Stable for U.S. and Canadian CMBS, but Some Sectors Present Risks

CMBS ratings will remain mostly Stable in 2020, with areas of softening asset performance driven by idiosyncratic risks and property sector-specific concerns.

Related Video:

Positive Rating Momentum to Continue for U.S. RMBS in 2020

Risks to watch in European Structured Finance

At our Risks to Watch in European Structured Finance series which took place in London, Frankfurt and Paris, senior analysts from Fitch discussed the risks affecting this sector and the key credit drivers across all asset classes. We have selected highlights from the event and sector to share with you


Download Highlights

Awards

Fitch Ratings Wins 2 Structured Finance Awards;Named Best in Financial Institutions & Public Finance

Fitch Ratings has been recognised as the best rating agency for structured finance at FinanceAsia's annual 2019 achievement awards and was also voted Australian structured finance rating agency of the year by KangaNews. FinanceAsia also named Fitch as the best credit ratings agency for financial institutions and public finance.

U.S. Whole Business Securitization Benefits Overstated

The overall benefits of U.S. whole business securitization, or corporate securitization, are often overstated. Part of Fitch's reasoning rests on the fact that many of these sponsors are securitizing the vast majority of their assets and liabilities, a rather stark contrast to traditional securitizations that are designed to isolate only a part of the assets from the fortunes of the company itself.

Outlook on Japanese Structured Finance Transactions Mostly Stable

The outlook on the ratings and asset performance for Fitch-rated Japanese structured finance transactions, including auto loan ABS and apartment loan CMBS, are mostly stable.

Korea ABS Rating Outlook Stable on Resilient Asset Performance

Fitch Ratings' Outlook on the ratings of its eight credit card and two auto-loan Korean ABS transactions is Stable, supported by resilient asset performance, benign interest rates and robust transaction structures despite the agency's expectations of slower domestic economy.

Outlook on Indian Auto Loans Stable-to-Negative Amid Economic Slowdown

Fitch Ratings revised its 2020 asset outlook on Indian auto loans to stable-to-negative, from stable in 2019, due to the country's major economic slowdown; we forecast GDP growth to decline to 4.6% in the financial year ending March 2020.

China Securitization Blockchain Use Growing, Not Yet End to End

The application of blockchain technology in securitizations in China seems to have proceeded at a faster pace than in other parts of the world, with multiple platforms developed independently.

Outlooks 2020

Stable 2020 Outlook for China's Structured Finance

Fitch Ratings maintains a stable asset performance outlook and Stable rating Outlook for Chinese auto-loan ABS and RMBS for 2020. We expect asset performance to be supported by an expanding, albeit slowing, economy, as highlighted by still-low unemployment and rising disposable incomes.

 

Related Report2020 Outlook: China Structured Finance

View all outlook: Credit Outlooks 2020

Webinar

CVAs Bring UK Retail Challenges to Prime Shopping Centres

UK retailers' use of Company Voluntary Arrangements (CVAs) is accelerating the commercial property market's adjustment to sector stress, Fitch Ratings says in a new report.

 

Related webinar:
CVAs Are Transmitting UK Retail Stress to Prime Regional Shopping Centres

Listen Now

India Auto-Loan ABS Pools Continue to Outperform Originators' Mother Pools

Indian auto-loan ABS transactions will continue to outperform the portfolios of their respective originators. The transactions we rate typically have peak 90+days past due (dpd) rates that are 30% to 60% lower than the vintage pools of the originators for the different loan types. The key reason for the better performance of securitised transactions is the exclusion of a riskier portion of the originators' portfolios.

5% Market Value Decline Implies One Notch Sensitivity in UK Auto Transactions

Following the decline in UK used car values in recent months, Fitch Ratings notes that based on model-implied outcomes, an additional 5% reduction to its net base-case sale proceeds assumption would impact senior auto ABS notes' ratings by one notch. A 2% decline is unlikely to have any effect on senior notes.
 

Related Webinar: European Auto ABS - How Sensitive are UK Transactions to Used Car Price Decline?

outlook

Australian, New Zealand Structured Finance Ratings Stable as House Prices Stabilise

Fitch Ratings' outlook for asset performance of and ratings on Australian and New Zealand structured finance is stable for 2020. The agency's view, which remains unchanged from 2019, is due to the sector being supported by continued GDP growth of 2.3% for Australia and 2.4% for New Zealand.

 

Related Report: 2020 Outlook: Australia, New Zealand Structured Finance


View all Outlooks: Credit Outlooks 2020

Australian Mortgage Prepayments Rebound from 19-Year Lows; Seasonal Fall in Arrears

The conditional prepayment rate on Australian mortgages rebounded from a 19-year low in 3Q19 to be up by 330bp to 19.0%, says Fitch Ratings in a new report. Prepayment rates have been low since 2017, with the conditional prepayment rate below 20% for the entire period; the longest period that the rate has remained below this level.

Chinese Credit Card ABS Falters as Auto ABS, RMBS Remain Strong

China's credit card ABS performance has deteriorated significantly over the past 21 months amid aggressive expansion by some banks into consumer finance, rising household debt and the spillover from the crackdown on shadow banking.

Fitch Ratings Launches ESG Heat Map for Structured Finance and Covered Bonds

Fitch Ratings has launched an ESG 'heat map' covering 54 different sub-sectors across 4,821 transaction and programme ratings for structured finance (SF) and covered bonds (CVB), to provide further insight into the relevance of ESG factors to credit ratings. The map is designed to help users understand how relevant individual ESG topics are to credit ratings across different sub-sectors for ABS, CMBS and RMBS transactions, and CVB programmes.

Webinar on Demand

European CLOs: Up-To-Date Definitions and Common Structural Features

Recently senior analysts from Fitch’s structured credit team held an updated discussion on common structural features observed in European CLO deals.
 

Listen Now

Low Rates Encourage Riskier Form of UK Commercial Property Finance

Engineering high ground rent ratios on commercial property significantly increases credit risk of leasehold collateral. With low interest rates, leverage is more likely to be constrained by loan-to-value limits than debt service coverage. To bypass this constraint additional funding can be raised by carving sizeable ground rent strips out of higher-yielding properties for sale to third parties. 
 

Webinar on Demand

ESG Relevance Scores for Structured Finance & Covered Bonds – The Fitch Approach

Listen to Fitch Ratings content on demand for webinars which will outline Fitch’s recently launched ESG relevance scores for structured finance and covered bonds.
 

Listen Now
EMEA & Asia Session
Americas Session

Australian Fixed-Income Investor Survey 4Q19

Australian fixed-income investors consider political and geopolitical risk to be the greatest threat to domestic credit markets over the next 12 months. A record-high 74% of respondents consider this to be a high risk; in fact, all top-five risks are linked to politics or possible fallouts from political disagreements, such as a China hard landing or a housing-market downturn.

Related Press ReleasePolitical Disagreements Unsettle Australian

Download the Full ReportAustralian Fixed-Income Investor Survey 4Q19

Fitch is the First Ratings Agency to Bring ESG Relevance Scores to Structured Finance and Covered Bonds

Our ESG Relevance Scores show the relevance and materiality of ESG to our rating decisions and are integrated into our ABS, CMBS and RMBS transaction reports and covered bonds program research to transparently and consistently display the impact of ESG elements on our credit ratings.
 

Watch the VideoIntroducing ESG Relevance Scores - Update for Structured Finance and Covered Bonds

 

Introducing ESG Relevance Scores for Structured Finance and Covered Bonds

Fitch Ratings says social and governance risks have the most impact on its new environmental, social and governance relevance scores for structured finance and covered bonds (SF and CvB) ratings globally. Initial results show on aggregate 18% of transactions and programs across SF and CvB asset classes contain contributing ESG factors or credit rating drivers.

Track Record Key for New Lenders in Australian Securitisations

The assignment of investment-grade ratings to securitisation transactions by new lenders in Australia depends on whether they can establish a stable set of underwriting criteria, a viable business model and a reliable asset performance track record over a considerable period of time.

APAC Structured Finance Stable in 3Q19

Structured finance transactions in APAC continued their steady performance in 3Q19, with 94 transactions affirmed, seven upgraded, 20 assigned new ratings and one Rating Watch maintained.

Uneven IBOR Progress Leaves Key Uncertainties for Structured Finance

Industry initiatives and adaptations in market practices continue in anticipation of the discontinuation of IBOR indices. But progress is uneven across jurisdictions and asset classes. For structured finance (SF), like other markets, key uncertainties relating to legacy contracts and transition in consumer products remain.

China Credit Card ABS Performance Worsens

Data collated by Fitch (which does not rate deals in this sector) shows aggregate performance deterioration in 27 credit card ABS transactions originated by seven banks. Some of their mother pool static performance data reported in shelf registration documents point to a similar trend.

Economic Factors Magnify Tail End Risks in U.S. TruPS CDOs

Mezzanine investors are facing a more challenging assessment of the risk-return trade-off following the record level of redemptions across Fitch-rated trust preferred (TruPS) CDOs observed in 2018, according to Fitch Ratings in a new report. Fitch believes that additional redemptions will be idiosyncratic in nature and unlikely to continue at the same pace as in the recent past. 

Chinese Auto ABS Has Similar Net Losses to Global Markets and Lower Recoveries

China's auto ABS annualised net loss (ANL) index was low over the past year, similar to the US and Australia, although Europe's was marginally better.


Related Press Release:
Chinese Auto ABS Has Similar Net Losses to Global Markets and Lower Recoveries

Australian Auto ABS Arrears Stabilise; Payment Rates Rise

Loss levels remained significantly below Fitch's expectations and we expect that ratings can withstand multiples of current loss levels, with stable macroeconomic conditions supporting borrowers' ability to service debt.

European Auto ABS Index Stable despite Steep Decline in UK Used Car Values

The UK, Germany, Spain and Italy all show a declining trend in used car prices this quarter, Fitch Ratings says in its latest index report for auto ABS in Europe. The change is particularly pronounced in the UK, where Brexit uncertainty is weighing heavily on consumer confidence. 
 

Catch up on our latest webinar:
Used Car Prices Decline – Not if Now, Why Now?

Higher Loss-Absorbing Capacity Rules to Slow Australia CVB Issuance

The Australian Prudential and Regulation Authority (APRA) in July 2019 announced its final rules on banks' total loss-absorbing capacity, which called on the four major banks to increase their capacity by 3pp of risk-weighted assets by January 2024.

Economy, Fuel Prices Are Key for Indian Auto ABS Performance

Data released this week by the Society of Indian Automobile Manufacturers showed that total auto production fell by 10.7% yoy in April-July 2019 and passenger vehicles sales dropped by 21.6% yoy.

China Structured Finance Quarterly - 2Q19

Chinese Auto ABS, RMBS Remain Strong Amid High Household Debt

The performance of Chinese auto ABS and RMBS transactions remained strong in 2Q19, despite the country's increasing household debt, due largely to the tight underwriting standards imposed by regulators, Fitch Ratings says. We continue to maintain the stable outlook for these two sectors. 

Chinese Auto-ABS Performance Pressure Eases in 2Q19

Auto-ABS issuance reached CNY78.4 billion by end-June 2019, exceeding issuance in the first three quarters of 2018. This was partly led by the continued rise in the auto-finance penetration rate to approximately 50% by end-2018, although it remained significantly lower than that of developed markets.

Rising Household Debt May Weigh on Medium-Term Chinese Growth

Chinese household debt has continued to rise rapidly, reaching 85% of disposable income at end-2018. Rising servicing costs will weigh on economic growth in the medium term and this is reflected in our latest GDP forecasts.

 

Related Press Release:
Rising Household Debt May Weigh on Medium-Term Chinese Growth

webinar

Testing the Resilience of European CLOs to a Credit Cycle Downturn

Over the last few months Fitch has been testing the resilience of our portfolio of post-crisis European CLOs against a credit cycle downturn. Senior analysts from Fitch’s structured credit team discussed the topic and gave an insight into the parameters of our tests and the conclusions in this webinar.

 

Listen Now

Rising Household Debt May Weigh on Medium-Term Chinese Growth

Chinese household debt has continued to rise rapidly, reaching 85% of disposable income at end-2018. Rising debt servicing costs do not pose near-term risks to financial stability, but will weigh on economic growth in the medium term and this is reflected in our latest GDP forecasts. 

Stronger Consumer Brands, Retailers to Outperform in China's Challenging Market

Fitch Ratings believes there are opportunities for specific retail and consumer companies to outperform the overall industry, even amidst slowing retail sales and weaker consumer sentiment. Consumers are becoming more selective in their purchases, but are still keen to spend, particularly in lower-tier cities, where income growth is higher.

Structured Finance 2000-2018 Issuance Loss Estimates Down

Total losses on US and Canadian structured finance (SF) bonds are concentrated in crisis-era transactions (2005-2007 vintages) and primarily consist of losses on US RMBS, Fitch Ratings says in a new report. Losses on SF tranches issued prior to 2009 contribute 99.9% of total SF losses. Approximately 95% of pre-crisis bond issuance is resolved (repaid or loss realized) or withdrawn. 

Rating Action

Fitch Upgrades Fuyuan 2018-2's Class B to 'AA+sf' and Affirms Class A1, A2; Outlook Stable

Fitch Ratings has upgraded the rating on the class B notes from Fuyuan 2018-2 Retail Auto Mortgage Loan Securitization Trust , and affirmed the ratings on the class A1 and A2 notes. The transaction is a securitisation of Chinese automotive loan receivables originated by Ford Automotive Finance (China) Limited (FAFC), a wholly owned subsidiary of Ford Motor Credit Company LLC (BBB/Negative/F2).

Fitch Launches China-Based RMBS and Consumer ABS Indices

Fitch Ratings has started tracking the performance of transactions issued in the China Interbank Bond Market by publishing RMBS and Consumer ABS indices.

Contacts

Marjan van der Weijden

Global

Marjan van der Weijden

Analytical Group Head

+1 212 612 7850

Doug Murray

Global

Doug Murray

Business Group Head

+1 212 908 0518

Ben McCarthy

APAC

Ben McCarthy

Analytical

+61 2 8256 0388

Sing Chan Ng

APAC

Sing Chan Ng

Business

+65 6796 7210

Susanne Matern

EMEA

Susanne Matern

Regional Group Head

+49 69 768076 237

Beatrice Mezza

EMEA

Beatrice Mezza

Business

+44 20 3530 1273

Maria Paula Moreno V.

LATAM

Maria Paula Moreno V.

Analytical

+1 312 606 2399

Samuel Fox

LATAM

Samuel Fox

Business

+1 312 606 2307

Rui Pereira

North America

Rui Pereira

Regional Group Head

+1 212 908 0766

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