Fitch gets tough on retained ABS originators
ABS originators that have a track record of allowing ratings on retained deals to slide might have future ratings limited to below triple-A level, warned Fitch on Thursday. The rating agency’s note was a warning shot to originators that manipulate transaction contracts instead of fulfilling contractual provisions.
It highlighted the behaviour of some originators that structured ABS deals for European Central Bank repo. These deals are retained, or held entirely by the originator. That means it is easy for originators to pass resolutions restructuring deals, in contrast to marketed deals, which require lengthy noteholder approvals.
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