Last week Moody’s Investors Service was preparing to release its most comprehensive structured finance transition study to date, tracking deals as far back as 1983, the rating agency said.
While the rating agency does not purport to have unveiled any major new discoveries, authors Jian Hu and Richard Canter aim to put hard data behind the ideas and concepts arrived at anecdotally by structured finance professionals over the past two decades. As such, the two hope that the study can serve as a statistic reference for the industry.
For example, Moody’s confirms that SF ratings tend to hold up better than corporates, though once nicked, an SF rating is more likely to experience further downgrades than a comparably nicked corporate.
“There are features in here that have been known, but this is the first time that they’ve been documented,” Canter said.
Moody’s used the ratings history of 18,000 securities. The number was arrived at after collapsing all pari passu tranches into one, and omitting any securities wrapped by guarantors, including the government-sponsored enterprises. The pool of data began with approximately 75,000 tranches.
Though there has been a higher concentration of structured finance downgrades in recent years, in the overall sample, Moody’s found that upgrades and downgrades have been fairly equal.