CDOs: Fitch won’t add to crisis

Fitch’s new, more conservative corporate CDO criteria were due to be announced on March 31. However, it is likely that there will be some slippage on that deadline because of the amount of feedback the rating agency has received. The new criteria would entail lower ratings on future trades – or lower leverage.

But because of widespread fears that an unleashing of the changes on existing CDOs would cause havoc as investors and dealers unwound positions, it appears highly likely that Fitch will introduce its new corporate CDO methodology in a manner that does not dramatically exacerbate the credit crisis.