Structured Finance Shows Mixed Performance in 2013, says Moody’s
The performance of structured finance in the Europe, the Middle East and Africa (EMEA) stabilised in 2013 as euro area event risks receded, while the global structured finance 12-month downgrade rate continued to decline for the fourth straight year to end 2013 at 9.1%, reports Moody’s.
A series of reports by the credit ratings agency (CRA) also shows that US structured finance securities accounted for 88.7% of the outstanding ratings and the bulk of the downgrades (82%) last year, in contrast with EMEA, which comprised 8.6% of the outstanding ratings and 14% of the downgrades.
Issuance of new ratings across EMEA continued to be limited in 2013. The number of new tranches issued in 2013 decreased to the lowest in the past 12 years. In 2013, commercial mortgage-backed securities (CMBS) and collateralised debt obligation (CDO) including collateralised loan obligation (CLO) sectors saw slight year-over-year increases in rated issuance by tranche count or volume, while asset-back securities (ABS) saw a modest decline and residential mortgage-backed securities (RMBS) experienced a larger decrease in both tranche count and volume.
Compared with 2012, overall structured finance rating issuance in 2013 was down by some 19% by count and 40% by volume. In total, 289 new ratings amounting to US$122bn were issued in 2013 compared with 358 totalling US$205bn in 2012. On a percentage basis, ABS accounted for the largest share of newly rated issuance by both count and volume followed by RMBS. The CLO sector saw its first issuance since 2010.
In 2013, there were a smaller number of downgrades in EMEA structured finance transactions compared with 2012. At the same time, the number of upgrades more than doubled from the level in 2012. Overall, 937 ratings from 405 deals were downgraded and 393 ratings from 180 deals were upgraded. The 12-month downgrade rate for EMEA structured finance decreased to 15.1% from 21.2%, while the 12-month upgrade rate rose to 6.3% from 2.0%. CLOs continued to outperform all other EMEA structured finance sectors, with the lowest 12-month downgrade rate and highest 12-month upgrade rate (5.4% and 18.1%, respectively).
By region, portfolios in peripheral euro area countries such as Spain, Italy and Portugal experienced the greatest downward ratings migration, but to a lesser extent compared with previous years owing to their stabilising economies.