The ABS Ratings Outlook has been recently revised to Negative from Stable due to the economic effects of the coronavirus. Fitch Ratings says that it is inevitable to have near-term weaker asset performance.
“ We are maintaining our 2020 Negative Outlook on timeshare loan ABS asset performance, which is expected to see more pressure than most other ABS sectors due to the strong relationship to travel and tourism.”
The sharp decline in economic growth will put pressure on borrowers’ income and the ability to make debt payments. It is obvious that in the current scenario timely loan payments will be secondary to other debt.
The ongoing economic fallout of the CoronaVirus Outbreak and it’s effects on US travel and tourism is having an unprecedented effect when compared with prior industry downturns. So, the potential for negative rating actions on Fitch’s outstanding rated portfolio has increased.
Coronavirus has caught both the United States and Europe unprepared for a scenario like this. The Central banks and Governments have unleashed unprecedented levels of monetary and fiscal stimulus to stabilize markets. The scientists are working franticly on effective treatment and research is ongoing to find a vaccine.
However, when the memories of the virus begin to fade, the world will be left with a significant bill in the form of high deficits and levels of government debt, and weaker currencies.
Timeshare and all travel-related industries are bound to bear the brunt of it for a long time to come.