S&P Underlines Regulatory Impact on European Corporate Securitizations
Regulation and government support can be important factors underpinning cash flow analysis in corporate securitizations and can also have a significant effect on a transaction’s debt leveraging capacity, according to a report published by Standard & Poor’s Structured Finance Ratings group. The report says that some businesses with marginal financial profiles can be relatively creditworthy because of government support or the predictable regulatory environment of their industry. Credit Analyst Elena Folkerts-Landau, a director in the Structured Finance group in London said, ‘The performance of commercial mortgage-backed debt is relatively vulnerable to economic recessions and refinancing risk. As a result, regulated housing securitizations tend to benefit from greater cash flow predictability, allowing higher debt levels and longer debt maturities for similar rating levels’.