Fitch Ratings is seeking market feedback on its new distressed recovery ratings for structured finance transactions. The new distressed recovery ratings will be assigned to four structured finance asset classes: collateralized debt obligations, asset-backed securities, residential mortgage-backed securities and commercial mortgage-backed securities. It is the first time Fitch has created distressed recovery ratings for these types of asset classes.
The ratings agency has published a draft of the new rating methodology and is seeking feedback on the ratings from investors, issuers and other market participants over the next month. The move follows other recovery ratings Fitch introduced in August for bank debt and bonds. Marion Silverman, managing director at Fitch, said the company decided to focus on distressed recovery ratings for structured transactions after seeing large demand for them in the market. Silverman said the number of distressed tranches across the four structured finance asset classes that it rates, amounts to more than 1,300.
"We want to provide additional transparency for distressed securities," said Silverman. "We feel that this will give additional clarity of what the recovery prospects are on these asset classes."