The rating performance of European small and medium-sized enterprise (SME) securitizations during the economic crisis are congruent with the macroeconomic environment, said a Moody's Investor Service report.
According to the report, that the main factor affecting European SME securitization rating migrations over the last four years has been the impact of the deteriorating regional economies in the euro area on the credit quality of underlying pools.
The sounder SME ABS markets of the Netherlands and Germany have been more stable than their weaker counterparts in Spain and the U.K.
SME ABS transactions issued in the Netherlands and Germany performed robustly from a rating perspective during the financial crisis from 2007 to 2011. Over the same period, however, Spanish deals comprised 58% of overall EMEA SME ABS downgrades, while U.K. transactions made up almost 22%. SME CLO ratings deteriorated across the board, with transactions backed by mezzanine loans showing the worst decline.
SME CLOs, although all originated in Germany, are an exception.
"Their weakened performance, which clashes with the German economy's recovery, stems from the fact that the majority of their underlying exposures are mezzanine loans," analysts said. "On the whole, portfolio composition, structural features and an originator's track record are all useful indicators of a transaction's robustness."