DBRS Morningstar published a commentary titled, “COVID-19: Mapping Tourism Exposure in European SMEs and Corporate CLOs”.
In this commentary, DBRS Morningstar explores the relevance of the tourism sector to various European economies and the exposure to the sector in the various structured credit transactions.
The impact of the Coronavirus Disease (COVID-19) is being felt across the globe, causing unprecedented disruption to the ways that people live and work, companies do business, and consumers operate. The significant actions taken by government as well as corporates and individuals to prevent the spread of virus has the collateral effect of causing economic damage that may become unrepairable for many businesses and individuals.
Key highlights in the commentary include
— A review of the importance of the tourism sector to different European economies.
— A snapshot of key tourism statistics, including the contribution of the sector to each of the relevant economies.
— A review of the level of exposure to the tourism sector in European small and medium-size enterprise collateralised loan obligations (CLOs), European middle-market CLOs, and synthetic corporate securitisations.
For the many SMEs and self-employed individuals that make up the tourism sector, the worst may yet still be to come. For seaside resorts, March and April are low season periods (except for the week around Easter) and while there was a loss of revenue it is only a fraction of the lucrative summer months. Unless tourism is allowed to resume, even if partially, by July it is likely that the sector will see a significant rise in defaults.
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