S & P Call Fires Up ABS World

Donovan, Kevin
May 2003
Investment Dealers' Digest;5/19/2003, Vol. 69 Issue 20, p9
Trade Publication
Ratings agency Standard & Poor's Corp. (S & P) has defended move on automobile lease asset-backed securities (ABS), saying downgrades not imminent. The agency's decision in the beginning of May 2003 to put 32 classes of automobile lease ABS on watch for a possible downgrade has led to criticism from researchers and bond issuers, according to the publication 'Asset Securitization Report.' S & P's decision came after questions about the role of federal agency Pension Benefit Guaranty Corp. (PBGC) The federal Employee Retirement Security Act of 1974, which empowers PBGC, requires that companies that operate defined-benefit retirement plans set aside and invest money to offset their accrued pension liabilities. S&P fears that the automobile lease ABS issuers in question, should they file for bankruptcy, will be at the mercy of PBGC.


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