Record Number Of Downgrades In U.S. ABS Market

Moody’s Investors Service said that there were a record number of downgrades among U.S. asset-backed securities (ABS) in the first half of 2002, but very few upgrades. It expects that downgrades of U.S. ABS will continue to exceed upgrades for the foreseeable future, and that there will be additional downgrades in many of the sectors that have shown weakness in the first half. ‘In the second half of 2002, we anticipate a significant number of downgrades of CDOs, as well as securities backed by franchise loans and aircraft leases – sectors that have been under stress since 2001,’ said Julia Tung, an analyst in Moody’s Investors Service Structured Finance Group. ‘For other asset classes, the amount of downgrade activity will depend on the timing and strength of the economic recovery.’ According to a newly released report, the 502 downgrades of ABS in first-half 2002 accounted for 37% of the total downgrades that have occurred since the market’s inception. Of the record number of downgrades in the first half, 80% affected CDOs, continuing a trend that began in first-half 2001.


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