As a result of the announcement made by Conseco Inc., the parent of Conseco Finance Corp. (formerly Green Tree Financial Corp.), that it is looking to sell its business, several classes of Green Tree certificates have been placed on CreditWatch by Standard & Poor's Ratings Service and on RatingAlert Evolving by Fitch IBCA.
"The reason was that these securities were tied to Conseco Finance ratings and they got placed on CreditWatch the week before," explained Jimmy Lam, a research assistant at S&P.
If the certificates are downgraded, several tranches of Green Tree's Manufactured Housing Trust and Manufactured Housing Senior/Sub Pass Thru Trust's will be affected.
The outcome of this situation all depends on the corporate rating of the buyer that Conseco is looking to sell the unit to, Lam explained.
Christopher Wolve, an associate director at Fitch, shared the same sentiment as Lam.
"It will depend on the company that they sell to and whether or not that company will guarantee or support the obligations of the finance," Wolve said. "If GE Capital was to buy it from them and they guaranteed everything then the ratings would be raised. If someone weaker buys them and decides not to guarantee it or take on the guarantee of Conseco Finances past obligations then we have to look at that and decide whether we would affirm it or downgrade."
It has not been determined whether or not other tranches of the affected deals may be in danger of downgrades, although both Lam and Wolve don't anticipate this happening.
"We're not aware of any asset quality or performance issues at this point but that will continue to be monitored... there's potential but I don't think that we're seeing anything right now that will indicate that," said Wolve. "The ones that have been put on alert are the ones where Conseco has provided a limited guarantee. Since the guarantee is based on Conseco Finances' ratings the value will change as Conseco Finances' rating changes."