SAO PAULO--(BUSINESS WIRE)--Fitch Ratings has published a special report regarding the imbedded risks in Brazilian Factoring-Sponsored Trade Receivables Securitizations.
Fitch's approach to rating Brazilian trade receivables securitizations has generally included capping ratings due to its view on certain risks inherent to multiseller/multi-obligor structured finance trade receivables via fundos de investimentos em direitos creditorios (FIDCs), particularly those sponsored by small-sized factoring companies and/or related entities.
Fitch emphasizes that various risks that are imbedded within these structures. 'While these risks are apparent in many trade receivables transactions, they are more acute in recent transactions sponsored by various types of Brazilian small-sized factoring companies,' said Jayme Bartling, Senior Director in Fitch's Brazilian Structured Finance group. 'Investors have increasingly inquired about our views on these structures, given the recent events in the securitization market.'
'It is evident in some transactions that the inadequate checks and balances, with over reliance on a single, low-rated party to perform credit origination, collection, and special servicing', commented Ely Mizrahi, Associate Director at Fitch. 'Proper segregation and transparency among originator and servicing responsibilities are paramount in a moment where many small-sized factoring companies have employed aggressive growth strategies, levering up their operations via securitization.'
Bartling added, 'Many of the risks cannot be mitigated by additional credit enhancement itself, and Fitch will therefore apply rating caps to trade receivables transactions sponsored by small-sized factoring companies that do not properly address certain seller/originator risks.'
The special report is currently available in English and Portuguese at 'www.fitchratings.com' and 'www.fitchratings.com.br'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: Imbedded Risks in Brazilian Factoring-Sponsored Trade Receivables Securitizations
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=612785
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.