Fitch: Mixed Outlook for Latin American Structured Finance in 2016

CHICAGO--(BUSINESS WIRE)-- The outlook is mixed across sectors for Latin American structured finance (SF), with 81.0% of Rating Outlooks being Stable or Positive, compared to 90.0% last year, according to Fitch Ratings.

The Outlook is Stable for consumer asset backed securities (ABS). Adequate levels of credit enhancement and structural features continue to protect Fitch-rated Brazilian consumer ABS against deteriorating macro conditions. Fitch expects delinquencies to peak in mid-to-late 2016, but at a lower share compared to those observed in 2012. The agency expects Mexican consumer ABS to continue to perform well in 2016.

Performance of Fitch-rated Latin American residential mortgage-backed securities (RMBS) continues to improve. This year featured a larger percentage of rating affirmations/upgrades to downgrades than 2014. The Stable Outlook for Mexican RMBS reflects macroeconomic stability and seasoned underlying portfolios. Despite falling real income and increasing unemployment in Brazil, the Outlook remains Stable for Brazilian RMBS due to generally favorable loan characteristics.

The Outlook is Negative for Fitch-rated commercial mortgage-backed securities (CMBS), the majority of which come from Brazil. The Negative Outlook for Brazilian CMBS reflects a challenging environment ahead for regional shopping mall-backed transactions. Negative Outlooks remain for Brazilian credit-tenant-lease transactions with Petroleo Brasileiro S.A. (Petrobras) as obligor.

Negative rating actions outpaced upgrades by a ratio of more than 3:1 in the year as of end of November. The majority of downgrades concerned transactions exposed to the Brazilian oil and homebuilder sectors. From late 2014 through third-quarter 2015, Fitch took multiple negative rating actions on oil vessel-backed transactions, as this sector was severely impacted by depressed oil prices and extraordinary corporate scandal.

Certain SF issuances are sensitive to a prolonged recession in Brazil with higher-than-expected unemployment growth. Oil vessel-backed SF and local Brazil transactions remain exposed to uncertainties related to Petrobras and the Lava Jato investigations.

Additional information is available on www.fitchratings.com

2016 Outlook: Latin American Structured Finance

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875064

Related Research

Brazilian ABS Securitization Primer

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=783929

Brazilian Covered Bond Framework

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=845688

Understanding Government-Backed Securities in Latin America (Financing Development through Structured Finance)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=761707

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Fitch Ratings
Gregory Lane
Director
+1 312-606-2304
Fitch Ratings, Inc.
70 W Madison Street
Chicago, IL 60602
or
Greg Kabance
Managing Director
+312-368-2052
or
Media Relations
Alyssa Castelli, +1 212-908-0540
[email protected]

Source: Fitch Ratings

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