Fitch Ratings last week published post-issuance reporting standards for European SME CDOs that should lead to better liquidity for these deals going forward, the rating agency claims.

A Fitch spokesperson noted that it hasn't changed its new issue-rating methodology, but is implementing a new reporting standard to promote transparency for a CDO asset class that has been criticized by investors for its shortfalls in data consistency and quality. Such flaws make it difficult to compare deals.

According to Fitch, this has discouraged potential investors for SME CDOs, though the sector continues to grow throughout Europe. Fitch said its new post-issuance reporting is in response to comments received from investors and other industry participants.

In the case of the Spanish market, which is counted among one of the more prolific issuers of SME CDOs, "structuring information dissemination will bring much- needed clarity that will lead to better liquidity of this product," said one analyst.

Fitch rated a total of 36 SME CDOs across a number of European jurisdictions. The larger concentrations were in Germany and Spain. According to Fitch, the Spanish market offers little more than basic delinquency information, which makes recovery amounts and other performance indicators difficult to determine. "In particular, cumulative defaults and recovery rates are rarely presented with clarity," Fitch analysts said. "This makes it very difficult to assess performance."

The new reporting standard will require managers to provide information on issuer data, performance data and counterparty details on at least a quarterly basis for each transaction that is rated.

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