Fitch Ratings' ABCP credit outlook for 2011 remains stable, which is in line with the outlooks for the global financial institutions that are the liquidity and credit enhancement providers to ABCP programs. 

If ABCP rating actions were taken, they will probably reflect the health of sponsors, support providers, and other relevant counterparties.

The rating agency predicted that there will be a continuation of trends in the global ABCP market that are consistent with those seen during the start of the financial meltdown in 2007.

Back then, ABCP outstandings dropped considerably as programs got out of the business and remaining sponsors stopped issuance and, in many instances, further consolidated conduits. Market players had to deal with economic uncertainty, although it was improving, and different mandated and pending financial regulations, Fitch analysts stated.

Other factors included investor migration toward traditional multi-seller programs financial institutions, and the continued improvement of the credit quality of underlying portfolios.

The main focus this year, according to Fitch, will be on evaluating the strength of the economy and potential impact of recent banking and financial institution regulatory changes.

Having terminated their noncore banking relationships as well as cleansed or restructured unfavorable asset types from their portfolios, almost all of the large bank sponsors are currently focusing their ABCP business mainly on offering cost-effective short-term financing of select asset types to key clients via multiseller conduits. 

The rating agency continues to see investor interest in traditional multiseller programs that are sponsored by highly rated financial institutions that have strong track records.

Consumer and commercial ABS as well as trade receivables comprise the majority of conduit holdings, the rating agency reported.

According to Fitch, market players are expected to focus throughout this year on evaluating the strength of the economy and the financial institutions that offer support to ABCP programs, as well as the impact of newly introduced and pending regulations.

Minimal outstanding growth is also expected by the rating agency. It is probable that larger sponsors will have to adjust structures and deals to comply with new regulations and to maintain the economics of their businesses due to the changes.

 

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