The European sovereign debt crisis that continued unfolding in December led to downgrades of the sovereign ratings of Portugal, Greece and Ireland.

As part of the crisis, there are also the negative ratings actions happening on the periphery of the securitization industry.

Unicredit analysts noted that all Greek securitizations rated at least single-A are on ratings watch negative (RWN) by Standard & Poor's.

Additionally, any tranche directly linked to the Greek sovereign rating is automatically placed on RWN by the agency. This has already led to 18 Greek RMBS tranches being on watch negative by S&P next to five European CDOs.

Meanwhile, Fitch Ratings has also placed all tranches of the Greek structured finance transactions that it rates on RWN following the placement of the Greek sovereign rating on RWN. Fitch currently rates 18 structured finance deals containing Greek collateral — 15 RMBS and three ABS transactions.

Irish ratings also feature a country-related ceiling on securitization ratings of 'AA'. This follows the sovereign downgrade by S&P. This is the reason that 36 tranches in 14 Irish offerings are on RWN by S&P, Unicredit analysts explained.

Portuguese RMBS exposure has also been affected. S&P put 81 tranches in 52 Portuguese deals on watch negative.

Moody's Investors Service also placed on review for possible downgrade the ratings of notes of 25 Portuguese structured finance transactions. Ratings under review include the 'Aaa(sf)' ratings on two RMBS, the ratings of most of the mezzanine and junior notes in 21 other RMBS transactions, and the ratings of six notes in four ABS transactions.   

"This latest episode with respect to the downgrade cycle is likely to continue," Unicredit analysts said. "For example, Moody's put Spain's sovereign rating on review for possible downgrade this week due to the country's significant refinancing needs of up to €170 billion ($223.4 billion) in 2011. In addition the heavy refinancing need of the Spanish financial system (€90 billion) is adding further pressure to the country's rating."

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