Fitch Ratings has placed 40 tranches from 15 public collateralised debt obligations (CDOs) and 33 tranches from 24 private CDOs on negative rating watch. The total exposure of these rated transactions is €1.27 billion.According to the New York-based rating agency, it has rated 136 CDOs that reference Delphi – the Michigan-based auto parts manufacturer that filed for Chapter 11 bankruptcy protection on October 8. Fitch said these deals’ total notional exposure to Delphi is equivalent to €3.89 billion.
Those transactions referencing Delphi that Fitch rated and did not place on negative rating watch are expected to have sufficient credit enhancement to absorb the loss, assuming a 5% recovery rate.
The rating agency said this rate was derived from the midpoint of the recovery rating assigned to Delphi's senior unsecured debt - typically ranked equally with the deliverable obligation within synthetic CDOs.
Managed deals account for 22% of the CDOs on negative rating watch.
More on Credit Derivatives
Managed deals could be next, but market's potential is expected to be limited
Active deals seen as “the next step” after last year’s revival of static CDOs
Risk Awards 2015: BlueMountain founder is at the centre of a changing market
Sign up for Risk.net email alerts
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.