Abridged from a report by Greg Kabance, senior director, Fitch

Structured finance transactions have been one of the few avenues available for borrowers in emerging-market countries to achieve investment-grade ratings. Most developed-market securitizations only concentrate on the protection of the underlying assets from the bankruptcy of the generating entity. When analyzing an emerging market securitization, Fitch must also analyze the country risks that could disrupt the underlying cash flows of the transaction. Such risks include potential restrictions on the transfer of hard currency out of a country, restrictions on the convertibility of local currency to hard currency, devaluation and exchange-rate risk, and certain degrees of expropriation. In a properly structured transaction, these risks should be mitigated.

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