NEW YORK–(BUSINESS WIRE)–lt;a href=”https://twitter.com/hashtag/CreditChronometer?src=hash” target=”_blank”gt;#CreditChronometerlt;/agt;–Subprime auto loan performance is expected to deteriorate soon,
according to a 360-degree market study released today by Credit
Chronometer, a microsite authored by Joseph
Cioffi, partner at Davis & Gilbert LLP and respected authority on
credit markets.
The report, Participants’ Expectations Point the Way to the Future of
Subprime Auto, summarizes the results of an anonymous study of
nearly 100 originators, investors, servicers, trustees and other
securitization market participants, on topics such as credit quality,
the sufficiency of credit enhancement protections and the ability to
obtain and maintain desired credit ratings. Participants’ views in these
areas diverge, at key points, from the generally upbeat sentiment
publicly reported. The full findings can be downloaded here.
“This pessimism for the future exists despite a rosy past, given that a
majority of respondents have not yet incurred a loss related to their
participation in subprime auto securitizations,” said Cioffi, chair of
Davis & Gilbert’s Insolvency, Creditors’ Rights & Financial Products
Practice Group.
Cioffi believes the securitization market’s historical success has been
due in large part to the balance achieved by three interdependent
factors: credit ratings, credit enhancements and credit quality. Cioffi
refers to these as factors as “C3” and finds that
participants’ responses indicate that “C3 equilibrium is
being disrupted by recent performance,” which will
impact credit enhancement levels and credit ratings. The report
describes how market expectations will need to adjust to restore the
balance.
Key findings of the study include:
-
A negative performance outlook is impacting participants’ views on the
sufficiency of credit enhancements and the ability to achieve desired
ratings. -
Investors express greater concern than other market participants
regarding credit enhancement levels, especially for subordinated
tranches. -
Credit quality concerns center on the vulnerability of subprime
borrowers to changes in the economy.
About Credit Chronometer™
Credit
Chronometer™ is dedicated to analyzing economic, market and
political events that shape the legal landscape, and impact credit
markets, including those related to auto, student and mortgage loans.
The Subprime Auto Loan Crisis Chronometer, which closely tracks market
risks, is a key feature of the site.
About Davis & Gilbert’s Insolvency, Creditors’ Rights & Financial
Products Practice Group
Davis & Gilbert’s Insolvency,
Creditors’ Rights & Financial Products Practice Group is a
multi-disciplined practice engaged in a broad range of corporate
finance, insolvency and litigation matters, involving sophisticated
financing products. The group regularly prosecutes and defends
litigation involving financial instruments, guides clients through
financially distressed situations and formulates and executes creditor
enforcement strategies. The extensive and diverse experience of the
interdisciplinary group makes it particularly well-equipped to advise
clients in rapidly evolving and dynamic industries.
About Davis & Gilbert
Davis & Gilbert LLP is a strategically focused, full-service mid-sized
law firm of more than 130 lawyers. Founded over a century ago and
located in New York City, the firm represents a wide array of clients –
ranging from small start-ups to some of the world’s largest public
companies and financial institutions – throughout the United States and
internationally.
Contacts
Dawn Longfield
Davis & Gilbert LLP
(212) 468-4981
dlongfield@dglaw.com
