New U.S. structured finance sector rating evaluations are surprising some analysts.
Fitch Ratings has found that several types of U.S. structured finance assets have been performing way better than expectations, even “far better than has been widely reported.”
According to a Fitch report, despite the severe economic and credit stress AAA CMBS and CLO ratings have “remained largely stable.”
Even “troubled sectors like CMBS” surpassed expectations in rating performance. Up to 94% of CMBS assets rated AAAsf “remain investment grade or paid in full,” Fitch said.
The study covers the performance of ABS, RMBS, CMBS and structured credit and several subtypes of securitization assets during the January 2008 to December 2011 period.
While findings indicate that data reports are helping increase process transparency, it is not clear whether they also show the ratings agencies are being conservative in their ratings.
The worst performers “among all structured finance sectors” were the RMBS and other real estate, CDO sector assets.
However, once bonds exposed to residential real estate were excluded, over 90% of AAAsf rated bonds “remained investment grade or were paid in full during the 2008-2011 period.”
A detailed analysis of the CDO sector shows “CLOs performed remarkably well, despite stress on its underlying corporate credits,” analysts wrote.
Over 96% of AAAsf CLO bonds remained investment grade or paid in full.
Meanwhile, Fitch described “as stellar” the rating performance of “numerous ABS sectors,” such as credit cards and autos.
