Fitch: U.S. Small Business Loan ABS Delinquencies Expected to Trend Higher in 2007

January 23, 2007; 01:38 AM
Shifting economic conditions and credit dynamics likely mean continued higher delinquencies for U.S. small business loan ABS for at least the first six months of 2007, though late stage delinquencies will likely trend down in that same time frame, according to Fitch Ratings in its inaugural edition of the 'Business Loan Bulletin'.

However, Fitch's analysis shows that the noticeable upward trend of 180+ day delinquencies historically trends upward during second quarter (averaging 41.18% of total delinquencies) before falling (averaging 37.27% of total delinquencies in third quarter). 'If younger delinquency buckets continue to capture a greater proportion of total delinquencies, pressure on defaults within the transactions may be alleviated,' said Director Du Trieu.

Fitch's Business Loan Bulletin, intended for publication on a semi-annual basis, will benchmark the delinquency performance on the unguaranteed portion of Small Business Administration (SBA) loans and conventional small business loans backing over $4.1 billion of outstanding issuance, correlated primarily to economic conditions, collateral characteristics, seasoning, and borrower profile. Underlying loans in Fitch's portfolio are secured primarily by real estate with borrowers across the United States in a variety of industries, including hotels, auto centers, service stations, retail centers, transportation equipment, rubber and plastic products, and metals and manufacturing.

The Business Loan Bulletin will provide investors a unique perspective surrounding the performance of the small business loan ABS sector. Aside from portfolio delinquency performance discussion, Fitch's index will include industry commentary and other areas of interest to participants in the small business loan ABS sector.

Fitch's 'Business Loan Bulletin' is available on the Fitch Ratings web site at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.