Collateral concerns prompt Fitch downgrades

Derivative Fitch has downgraded $37.2 billion of structured finance collateralised debt obligations across 84 transactions. The agency has also affirmed $6.9 billion of structured finance CDOs.

Fitch’s rating actions follow the completion of a review of 55 US and European structured finance CDOs executed on a synthetic basis, and 29 US and Asian structured finance CDOs executed on a cash/hybrid basis. Ratings on 66 US cash and hybrid structured finance CDOs remain on rating watch negative.

The rating agency says its actions are based on the continued credit deterioration of the underlying collateral, as well as changes to the default forecasting assumptions underlying Fitch’s default model, Vector. The updated assumptions reflect increased probabilities of default with respect to recent vintage subprime residential mortgage-backed securities and structured finance CDOs.

A detailed criteria report reflecting the full assumption set, scenario analysis and description of adjustments will be published on Fitch’s website. Additionally, Fitch will outline the transaction-specific analytical factors with respect to each of the transactions included in its rating actions commentary.

A spreadsheet reflecting the complete list of rating actions is available for download at www.fitchratings.com/subprime.