Since launching its Issuer Report Grades ("IRGrades") in November 2004, Fitch Ratings has found a noticeable improvement in the quality of post-issuance reporting for European structured finance (ESF) transactions. "A wide range of issuers from across all the asset classes in ESF have approached us for guidance on how to improve their reports and earn a higher IRGrade," said Vas Kosseris, senior director at Fitch.
IRGrades are aimed at identifying and maintaining good reporting practices while encouraging improvement in issuer report standards not currently achieving high IRGrades.
Grades are awarded on a one- to five- star scale. In Rising Stars? Fitch Issuer Report Grades -- H1 2005 Update published yesterday, analysts said the average IRGrade has risen to 3.14 from 2.80 in November. Fifteen transactions now reach the maximum five stars compared with only one in November 2004 and 81% of the IRGrades awarded are three stars ("adequate") or better, compared with 73% in November 2004. IRGrades are now published on 590 transactions, up from 531 last November.
At 52%,RMBS accounts for the largest share of IRGrades, showing the greatest improvement with its average IRGrade rising 16% to 3.21 stars. This was largely due to 58 Spanish and Dutch transactions being upgraded to four stars from three. The first five star IRGrades for RMBS, the only sector to have a transaction at that level, would probably be awarded in the near term. Meanwhile, the small and medium enterprise ("SME") CDO sector had the highest average IRGrade of 3.40 stars.