Fitch Ratings today said that European structured finance upgrades outnumbered downgrades by three to one in 1Q05, continuing the trend the sector has witnessed since 2003. European RMBS, which experienced positive performance in 2004 with 84 tranches upgraded and just seven downgraded, started off the year with six downgrades and no upgrades in 1Q05. All six downgrades were on a single deal (Provide Gems 2002-1 Plc). Fitch said that these actions came in response to a rise in delinquencies, credit events, increased losses, low recoveries and challenging economic conditions in the former East Germany. CMBS emerged as a "bright spot," said analysts at the agency, with no downgrades in either 4Q04 or 1Q05. In Europe CDOs have seen the most activity in 1Q05 with 16 rating actions including 14 upgrades. Globally CDOs also showed strong performance during 1Q05 with over twice as many upgrades than downgrades. The number of upgrades was consistent with 2004 averages while the number of downgrades dropped substantially.

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