Fitch: Recent Mexican Equipment Lease Securitizations Raise Credit Concerns

MONTERREY, Mexico--()--Link to Fitch Ratings' Report: Credit Concerns in Recent Mexican Equipment Lease Securitizations

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=700253

Several recently-issued Mexican equipment lease asset-backed securities (ABS) include credit risks that were not sufficiently mitigated to achieve 'AAA(mex)' ratings, according to a new Fitch Ratings special report.

The report titled 'Credit Concerns in Recent Mexican Equipment Lease Securitizations' highlights three key credit concerns: limited sponsor strength; revolving structures susceptible to operational risks and origination policies; and excessive concentrations relative to initial credit enhancement levels.

Fitch reviews transactions on a case-by-case basis, and its criteria allows for Mexican equipment lease ABS to be rated up to 'AAA(mex)' with no explicit cap; in these cases, the combination of these risks would have limited Fitch's ratings to 'A(mex)' through 'AA(mex)' or lower.

In Fitch's view, it is difficult to completely de-link sponsor strength from the transaction rating for small, low credit quality sponsors that utilize ABS as a primary funding source to fuel aggressive growth strategies, especially when a large majority of the balance sheet is transferred to a securitization.

Secondly, transactions structured with pre-funding or revolving periods present additional risks particularly for sponsors with a limited track record. Down cycles can present unexpected pressure which can negatively influence origination policies and corporate priorities, and potentially contaminate the revolving loan portfolio.

Lastly, obligor concentration risks have not been adequately addressed in several recently-closed deals, evidenced in transactions that have a relatively high cumulative concentration in unknown obligors with limited initial credit enhancement.

For more information, the full special report is available at www.fitchratings.com or by clicking on the link below.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (June 6, 2012).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923

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Contacts

Fitch Ratings
Rene Ibarra
Senior Director
+52 81 8399 9130
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612, Monterrey, Nueva Leon, Mexico
or
Bernardo Costa
Senior Director
+55 11 4504 2607
or
Gregory Lane
Associate Director
+1-312-606-2304
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Rene Ibarra
Senior Director
+52 81 8399 9130
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612, Monterrey, Nueva Leon, Mexico
or
Bernardo Costa
Senior Director
+55 11 4504 2607
or
Gregory Lane
Associate Director
+1-312-606-2304
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com