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Structured
Moody's announces a wave of downgrades after applying sovereign ceiling
Wednesday, February 22, 2012
Moody’s has announced that it has downgraded 478 tranches from structured finance deals exposed to assets located in Italy and Spain. The rating agency has also placed a further 387 tranches on review for downgrade. The action comes after Moody’s last week announced that it is imposing a ceiling on structured finance securities originating in Italy, Spain and Portugal.
In total, 255 RMBS deals, 127 other ABS transactions and five CLOs have been affected.
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Trading
Issuers
CFlux secondary
CLO index levels:
| Index | 21 May |
|
| CFlux USD AAA | ↑ | 96.2 |
| CFlux USD AA | ↑ |
88.3 |
| CFlux USD A | ↓ | 84.1 |
| CFlux USD BBB | ↓ | 75.3 |
| CFlux USD BB | ↓ |
74.1 |
| CFlux USD EQ | ↑ | 77.5 |
Hate to say it, but there's nothing bold or instructive here. For Italy and Spain with sovereign ratings of A3, Moody's is essentially lowering Aaa and Aa1 ratings to Aa2. The recent Moody's article on the impact of sovereign ratings on structured (and other) ratings consists, in my opinion, only of vague thoughts and warnings with no justification of a 4-5 level "upgrade" of structured ratings above the sovereign.
To clarify, the 127 ABS transactions are not CDOs of ABS, as we said in the original version of this article.