(Repeat for additional subscirbers)
June 12 (The following statement was released by the rating agency)
Fitch Ratings is participating in the annual Global ABS
conference in Barcelona, with a combination of presentations and panel
discussions. Below are some highlights from the key presentations and panels in
which Fitch participated:
Marjan van der Weijden, Managing Director, Head of EMEA Structured Finance:
"As Europe begins to slowly recover, securitisation could play a more prominent
role in helping fund the real economy. Explicit support from policy makers has
identified the use of securitisation as a funding tool for SME lending across
Europe and, from a credit perspective, we believe this is feasible given our
portfolio of rated SME CLO transactions has largely performed in line with
"However, there are some hurdles to jump before SME CLOs can really take off.
The spreads on the assets, the credit protection and also the spreads investors
are expecting are a challenge to make SME CLOs currently economically viable
without any support from an external or public entity. Furthermore, other real
economy assets such as residential mortgages, consumer loans and auto loans are
not facing the same hurdles and are currently easier to securitise."
Gregg Kohansky, Managing Director, Head of EMEA Residential Mortgage Backed
"Despite the divergence between European core and periphery credit fundamentals
since the financial crisis, European RMBS ratings have performed within
expectations.'AAA' issuance from core countries has largely remained at this
rating level, while 'AAA' issuance from the periphery has been downgraded to the
'A' range - principally due to counterparty and sovereign risks, rather than
underlying asset performance."
"The housing and mortgage markets in these two regions will continue to show
differentiation and while we expect to see more asset performance pressure on
the periphery, we are also starting to see some green shoots there, such as in
Ireland where house prices are slowly increasing. In the core, the UK continues
to show robust house price growth, especially in London, and despite our
concerns around the sustainability of recent increases higher-risk lending is
actually on the way down. High loan to value and debt to income lending volumes
are about one-tenth of pre-crisis peak levels."
Matthias Neugebauer, Managing Director, Head of EMEA Structured Credit:
"European CLOs returned last year with Cairn CLO, the first transaction since
2008. Issuance in 2013 totalled EUR7.5bn and we expect it to exceed EUR10bn for
2014. The primary growth constraints on the market are regulation, in particular
risk retention rules, as well as the availability of loan collateral."
"We expect the European Banking Authority's retention rules, which effectively
allow the asset manager to obtain funding for the retention stake, reducing the
amount of capital they require, to help some new smaller asset managers join the
market. The first loan-only European CLO deal to attract US bank investors in
2014 was the Harvest IX transaction. The deal was intended to be Volker
compliant by removing bonds and floating rate notes. However, we expect only a
limited number of European CLOs to follow this trend, as Volker compliance
reduces the investable universe even further."
Click on the below link for video highlights of the key topics Fitch has
discussed at the Global ABS conference in Barcelona:
Link to Fitch Ratings' Report: EMEA Structured Finance - Global ABS Edition