Traditional non-mortgage consumer assets continue to dominate U.S. ABCP conduit holdings while exposures to riskier assets have dropped well off their highs of the past two years. The falloff in exposure to assets such as RMBS and CDOs is not surprising, as many sponsors took proactive measures over the past two years to reduce, remove, or provide more support to certain exposures in an effort to allay investor concerns.
While Fitch expects the collateral performance of consumer-related assets to worsen throughout the recession, direct impact on ABCP conduit ratings should be minimal. Conduits have historically financed senior tranches of consumer-related transactions. Over the past two years, many conduit transactions have been restructured with higher levels of protection in the form of credit enhancement or other means of support. In conjunction with the availability of programwide credit enhancement facilities and other structural mechanisms, these actions are expected to help insulate ABCP investors from the deteriorating performance of consumer-related assets.