Mortgages and CDOs Playing Lesser Role in ABCP Conduits
Traditional non-mortgage consumer assets continue to dominate U.S. asset backed commercial paper (ABCP) programs, according to an analysis by Fitch Ratings.
Combined credit card, auto, and student loan exposures made up approximately 53% of the holdings in Fitch rated multiseller conduits at year-end 2008.
While Fitch expects the performance of consumer related assets to continue to deteriorate through the recession, the impact on ABCP conduits is expected to be limited.
Conduits have historically financed senior positions of consumer related transactions. Over the past two years, many conduit transactions have been restructured with higher levels of protection in the form of credit enhancement or other means of support. Taken with the availability of programwide credit enhancement facilities, these actions will help to insulate ABCP investors from consumer asset related performance concerns, Fitch says.
The most recent data shows the growth in consumer assets has come as exposures to residential mortgage and collateralized debt obligations (CDO) have fallen from their highs from previous points in the prior two years. Combined residential mortgage and CDO exposure made up close to 5% of Fitch rated multiseller conduits at year-end 2008, down from over 16% two years prior.
U.S. ABCP outstandings have declined more than 7% from year-end 2007 to year-end 2008 from $780 billion down to $724.5 billion. Overall exposures to non-mortgage consumer assets grew significantly during the period.
Fitch analyzed ABCP collateral pool compositions including exposures to residential mortgages as well as CDO and financial guarantors, and any other related counterparties. The analysis also included a Monte Carlo simulation analysis of multiseller and securities-backed programs if applicable.
For details see: U.S. Multiseller ABCP Ratings Remain Insulated From Consumer Credit Concerns.
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