No further action on $7 bln of CIT-sponsored ABS-Moody's

NEW YORK Nov 2 (Reuters) - Moody's Investors Service said on Monday it would take no further rating action on $7.03 billion of CIT-sponsored asset-backed securities after CIT Group (CIT.N) filed for a prepackaged bankruptcy.

CIT, through its subsidiaries, acts as the servicer, master servicer, administrator, or servicing administrator in sixteen asset-backed securitizations. Importantly, the prepackaged reorganization plan did not include any of these or any other of CIT's operating subsidiaries, said the rating agency.

The assets backing the transactions are equipment leases, small business loans, student loans, and aircraft leases.

Previously, on July 15, Moody's placed a number of CIT-sponsored ABS under review for possible downgrade, following the emergence of bankruptcy as a distinct near-term possibility. The rating agency said a high likelihood of a CIT bankruptcy was already reflected in the ABS ratings and as a result no further rating action would be taken at this time.

Nine CIT-sponsored securitizations were placed under review for possible downgrade in connection with the downgrade of the company's long-term rating to Ca, in July. The review reflected the increased risk of a near term bankruptcy filing by CIT and the related servicer disruption risk.

In general, the bankruptcy of a servicer may disrupt its operations, with possibly detrimental effects on serviced ABS, said Moody's. It noted, for example, the servicer's employees may lack proper motivation or seek employment elsewhere, disrupting normal workflow and possibly stall collection activities.

CIT's prepackaged bankruptcy seeks, among other things, to avoid a bankruptcy of the company's subsidiaries that perform servicing and administration functions for the securitizations.

However, the ratings remain on review as the bankruptcy still presents some risks. For example, servicing quality deterioration is still possible, as the servicer may lose some of its workforce.

The rating agency said it is unlikely that the ratings will be confirmed before the company exits bankruptcy. Conversely, the ratings may face downward pressure if there is evidence during the course of the bankruptcy process that servicing quality is deteriorating. (Reporting by Nancy Leinfuss; Editing by Kenneth Barry)