The credit outlook for U.S. asset-backed commercial paper (ABCP) in 2012 is negative, although the outlook for the credit quality of assets funded by ABCP is neutral to improving, according to a Moody's Investors Service report on the sector.
"Our outlook for ABCP is negative primarily because of our negative outlook for the global banking sector," said Everett Rutan, a Moody's senior vice president.
The rating agency noted that its credit outlook for the banking sector worldwide is negative. The credit quality of the banks is the main driver for the credit quality of ABCP, because almost all conduits rely on liquidity facilities from the banks for timely repayment.
However, asset credit quality hasn't been an issue in the multi-seller ABCP conduits that now dominate the U.S. market, and sponsors have removed troubled assets from their conduits, according to the report.
Moody's expects the volume of outstanding commercial paper is likely to decline this year on the back of macroeconomic and regulatory uncertainty.
In 2011, the rating agency rated only two new U.S. conduits and withdrew the ratings on nine. According to the report there is presently no pipeline of new conduits.
"Facility utilization remains below 40% for the U.S. multi-sellers," notes Rutan. "Depending on the pace of economic activity, low utilization could either portend further declines or facilitate a rapid rise in outstandings if demand increases."
