Fitch places 73 CDO tranches with Delphi exposure on negative rating watch

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.

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