From Fitch — the ratings agency which downgraded the Hellenic Republic to BBB+ on Tuesday — a structured finance follow-up for Wednesday:
Fitch Places all Greek Structured Finance Deals on Rating Watch Negative
Fitch Ratings-London-09 December 2009: Fitch Ratings has placed all its structured finance transactions in Greece on Rating Watch Negative (RWN) following the downgrade of the Greek sovereign ratings to ‘BBB+’/ ‘F2′ with Negative Outlook.
The rating action reflects Fitch’s opinion that the adverse macroeconomic developments which underpin the sovereign downgrade will also negatively impact the performance of rated securitisation transactions. While the sovereign ratings downgrade is primarily driven by negative fiscal dynamics, Fitch expects the general economic outlook to remain uncertain in Greece over the short term, leading to higher unemployment and consumer arrears.
Furthermore, Fitch considers that the degree of sovereign risk indicated by Greece’s current ratings is no longer compatible with ‘AAA’ ratings in structured finance deals. Critically, the sovereign downgrade signals a higher – albeit still remote – risk of a sovereign default, which would affect securitisation tranches rated above Greece’s Long-term local currency Issuer Default Rating (IDR) of ‘BBB+’.
While Fitch believes that the risk in securitisations rated up to six notches above an EMU sovereign’s rating can usually be addressed by appropriate default and performance stresses, the agency also believes that following today’s downgrade of Greece, regular transaction stresses can no longer minimise this risk in the highest rating category. As a result, Fitch expects that all new and most existing securitisation ratings secured on collateral located in Greece will be capped at the ‘AA’ rating category, as long as Greece’s sovereign rating remains in the ‘BBB’ rating category.
Going forward, Fitch will apply a similar capping approach in other EMU sovereigns if their Long-term local currency IDRs fall into the ‘BBB’ rating category. Fitch will be releasing a criteria framework on the linkage between sovereign ratings and structured finance ratings in coming months.
Fitch expects to review all rated transactions and resolve the RWN over the next three months. The agency will decide whether current ratings can be affirmed or need to be downgraded based on the amount of current versus original available credit enhancement, the degree of amortisation of rated tranches and the remaining time to maturity, among other factors.
Fitch expects to review all rated transactions and resolve the RWN over the next three months. The agency will decide whether current ratings can be affirmed or need to be downgraded based on the amount of current versus original available credit enhancement, the degree of amortisation of rated tranches and the remaining time to maturity, among other factors.
Applicable Criteria ‘Global Structured Finance Rating Criteria’, dated 30 September 2009, is available on www.fitchratings.com.
The following rated tranches have been placed on RWN:
RMBS
Byzantium Finance Plc
EUR87.4m Class A notes: ‘AAA’
EUR15m Class B notes: ‘AA-’
EUR10m Class C notes: ‘BBB+’
Byzantium II Finance Plc
EUR351.6m Class A notes: ‘AAA’
Estia Mortgage Finance Plc
EUR306.1m Class A notes: ‘AAA’
EUR35m Class B notes: ‘AA-’
EUR17.4m Class C notes: ‘BBB’
Estia Mortgage Finance II Plc
EUR1,086.4m Class A notes: ‘AAA’
EUR91.2m Class B notes: ‘A’
EUR21.2m Class C notes: ‘BBB’
Estia Mortgage Finance III Plc
EUR714m Class A notes: ‘AAA’
EUR86m Class B notes: ‘BBB’
Grifonas Finance No.1 Plc
EUR764.3m Class A notes: ‘AAA’
EUR23.8m Class B notes: ‘AA+’
EUR28.5m Class C notes: ‘BBB+’
Kion Mortgage Finance Plc
EUR200.7m Class A notes: ‘AAA’
EUR28.2m Class B notes: ‘AA’
EUR18m Class C notes: ‘A-’
Kion Mortgage Finance No.2 Plc
EUR456.8m Class A notes: ‘AAA’
EUR62.6m Class B notes: ‘BBB’
Lithos Mortgage Financing Plc
EUR191.8m Class A notes: ‘AAA’
EUR33.4m Class B notes: ‘AA-’
EUR23.4m Class C notes: ‘BBB’
Stegasis Mortgage Finance Plc
EUR294.7m Class A notes: ‘AAA’
Themeleion Mortgage Finance Plc
EUR94.5m Class A notes: ‘AAA’
EUR10.7m Class B notes: ‘AA+’
EUR8.2m Class C notes: ‘BBB+’
Themeleion II Mortgage Finance Plc
EUR122.2m Class A notes: ‘AAA’
EUR18.6m Class B notes: ‘AA-’
EUR11.2m Class C notes: ‘BBB+’
Themeleion III Mortgage Finance Plc
EUR215.3m Class A notes: ‘AAA’
EUR22.6m Class M notes: ‘AA’
EUR11.3m Class B notes: ‘A+’
EUR22.6m Class C notes: ‘BBB+’
Themeleion IV Mortgage Finance Plc
EUR1,005.8m Class A notes: ‘AAA’
EUR155.5m Class B notes: ‘A’
EUR46.6m Class C notes: ‘BBB’
Themeleion V Mortgage Finance Plc
EUR764,3m Class A notes: ‘AAA’
ABS
Karta 2005-1 Plc
EUR592.5m Class A notes: ‘AAA’
EUR75m Class B notes: ‘A+’
EUR82.5m Class C notes: ‘BBB’
In addition, the following rated tranche remains on RWN:
Revolver 2008-1 Plc
EUR1,500m Class A notes: ‘A’
(Nota bene – we think that headline means structured finance in Greek).
Related links:
Greece is the word… – FT Alphaville
How do you say vicious circule in Greek? – FT Alphaville
Pressure on Greece mounts after downgrade – FT