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Report Discusses How The COVID-19 Outbreak Affects Rating Assumptions For China Auto ABS And RMBS


Report Discusses How The COVID-19 Outbreak Affects Rating Assumptions For China Auto ABS And RMBS

HONG KONG (S&P Global Ratings) March 4, 2020--The COVID-19 epidemic and increased uncertainty over how long the outbreak will last have rattled financial markets in Asia. In this context, S&P Global Ratings published a report explaining how it factors in the potential effects of the outbreak when analyzing auto asset-backed securities (ABS) and residential mortgage-backed securities (RMBS) in China.

The report, titled "How S&P Global Ratings Factors In The Potential Effects Of The COVID-19 Outbreak When Analyzing China Auto ABS And RMBS," states that the magnitude of the potential impact of the outbreak could vary from transaction to transaction. Much would depend on transaction-specific features, such as asset types, major borrowers' occupancy, geographic distributions, and structural arrangement.

"At this stage, we expect the outbreak to affect China's economic growth for two to three quarters, based on the public information we have at hand," said S&P Global Ratings credit analyst Andrea Lin. "Our stressed default frequency for the rating level already captures the corresponding borrower default risk for the respective China auto ABS and RMBS transactions. However, we consider that the repayment capability of some obligors in the underlying pool may be temporarily impaired."

To address the possible effects on our rated securitization transactions in China, we're working with the assumption that the spread of the disease will subside during the second quarter of 2020. We also undertook additional cash flow sensitivity analysis for each of these transactions to address the potential impact of a payment delay.

This report does not constitute a rating action.

The report is available to subscribers of RatingsDirect at www.capitaliq.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to research_request@spglobal.com. Ratings information can also be found on S&P Global Ratings' public website by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.

Primary Credit Analyst:Andrea Lin, Hong Kong (852) 2532-8072;
andrea.lin@spglobal.com
Secondary Contact:Jerry Fang, Hong Kong (852) 2533-3518;
jerry.fang@spglobal.com
Media Contacts:Ning Ma, Hong Kong (852) 2912-3029;
ning.ma@spglobal.com
Michelle Lei, Beijing (86) 10-6569-2961;
michelle.lei@spglobal.com
Chris Davis, Hong Kong (852) 2533-3511;
chris.g.davis@spglobal.com

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