Moody's - Shifts in Credit From Coronavirus Shocks Will Weaken Global Securitization

Global economic deterioration as a result of the spread of coronavirus is weakening the credit quality of structured finance transactions. The extent of that weakening among and within different asset classes will depend on a number of factors, according to a new report from Moody's Investors Service.

Some structured finance sectors are closely related to industries that have high exposure to the coronavirus outbreak. Some securitizations retain exposure to transaction sponsors whose credit strength is vulnerable to the economic shocks stemming from coronavirus.

National and regional differences will also influence how deeply the virus's effects impact transaction performance, according to the rating agency report.

"The magnitude of shocks to asset performance will vary by asset class and by geography," says Moody's Vice President Peter McNally. " And transaction structures, including a specific bond's position in the capital structure of a transaction will influence the timing and severity any credit impact."

These factors guide the prioritization of Moody's credit analysis, according to the high and moderate vulnerability of an asset class to the current credit shock, with the securities that rank at the junior end of the structures seeing a bigger negative impact than those at the senior end.

The shape and duration of the downturn and the impact of government support measures in a given region or country will play a major part in determining the ultimate impact that the coronavirus has on the creditworthiness of structured finance transactions.

Subscribers can access the report at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1222641

Peter McNally
VP-Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
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Jian Hu
MD-Structured Finance
Structured Finance Group
Moody's Investors Service, Inc.
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Carole Gintz
Associate Managing Director
Structured Finance Group
Moody's France SAS
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Jingjing (Nicky) Dang, CFA
Associate Managing Director
Structured Finance Group
Moody's Investors Service, Inc.
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Client Service: 1 212 553 1653

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