Fitch has placed the Oz Receivables plc future - flow securitization on Rating Watch Negative. The deal is secured on ticket receivables from Asiana Airlines trans-Pacific routes. Asiana Airlines, a Korean company, has also been put on Rating Watch Negative.
A number of Asian airlines derive a significant portion of their income from flights to the United States. After the attacks in September, air travel to that country was disrupted for a number of days, which caused Asiana to lose about W5.4 billion ($4.15 million). Asiana derives 22% of its income from trans-Pacific routes.
Asiana's overall load factor for September 2001 was down 3.6% in September 2000, and its load factor between September 12 and September 23 was down 5.8% on the level recorded earlier in the month, prior to the attacks. Going forward, Asiana expects its revenue to contract by W6 billion ($4.6 million) a month.
Many airlines are now also at risk of being grounded by the sudden increase in insurance premiums. Airline insurers revised their policies for third-party damage by limiting the coverage to $50 million, though the South Korean government has said that it will guarantee cover policies for over $50 million up to $1.5 billion.
Fitch hopes to resolve the ratings on Oz Receivables over the next few weeks. The transaction has to maintain a debt service coverage ratio of 2.5 times. In recent months, it has been well above that, reaching ratios of: 5.07 times in July; 4.89 times in August; and 4.59 times in September. If debt service coverage ratio falls below the 2.5 times minimum, collections on the receivables can be retained by the trust for payment to the noteholders.
The current economic situation is most likely to affect Asian industries that rely on exports, in particular the technology industry. However, not many securitizations in non-Japan Asia are exposed to this. Commercial property, in particular hotels and retail properties, could also be affected. But these sectors were always volatile, and this is something that commercial property securitizations would have taken into account.