London, 04 August 2010 -- Strong auto loan performance in Germany has enabled the performance of auto asset-backed securities (ABS) to be relatively stable overall in the EMEA (Europe, Middle East and Africa) region, says Moody's Investors Service in a new Special Report . In the report entitled "Sector Review: EMEA Auto ABS", Moody's says that outside of Germany, performance deterioration has been more pronounced, especially in Spain and Portugal, where labour market pressure has been more acute.
"In Germany, the performance of German auto receivable sector has been relatively strong during the recession and the early stages of the economic recovery. The German labour market is relatively stable and German borrowers have a generally low level of indebtedness" said Moody's Economist Nitesh Shah.
"Auto loan ABS originated by captive finance companies has continued to out-perform auto loan ABS originated by non-captive originators," says Mr. Shah. "This long-running trend is because captive originators finance new car sales, which are typically higher priced and therefore require a more credit worthy borrower. The relatively better performance is also due to the larger representation of German transactions in the captive market, where performance has been more robust. "
At the end of the first quarter Moody's rated an aggregate outstanding balance of €26.3 billion of auto ABS comprising 59 transactions. German auto ABS makes up more than half of this volume.
Moody's raised its outlook on German auto loan ABS to stable from negative earlier in July, as it expects continued stability in the labour market to support performance. The outlook for auto ABS in EMEA outside of Germany remains negative.
Between January 2009 and May 2010, Moody's downgraded 15 auto ABS deals and upgraded three auto ABS deals. Most of the downgrades were driven by the change in the local currency ceiling in South Africa. Operational risk concerns were the second largest driver of downgrades. Three deals, all German, saw upgrades following better-than-expected performance.
Between January 2009 and May 2010, 76% of notes in EMEA auto ABS rated Aaa maintained their Aaa ratings, while 22% of these notes were downgraded to Aa.
Moody's notes that the main credit reason for not rating certain auto ABS transactions over the past year has been unmitigated operational risks.
At times, insufficient enhancement levels have been a contributing factor but were not the predominant reason for not assigning a rating.
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London
Jean Dornhofer
Senior Vice President
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Nitesh Shah
Economist
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
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© Press Release 2010
