OREANDA-NEWS. Fitch Ratings has published its Treatment and Notching of Hybrids in Non-Financial Corporate and REIT Credit Analysis, which reflects an update to its analytical approach to hybrid instruments.

Although Fitch does not expect the revised approach to result in any rating impact, equity credit (EC) on the cumulative hybrid debt of REITs and certain mandatory convertibles rated by the agency may be affected. Credit metrics may worsen for 26 publicly rated preference share-issuing REITs (all in the US), due to the revision to 50% from 100% EC for REIT cumulative hybrids. In contrast, credit metrics may improve for four publicly rated issuers, due to the assignment of up to 100% EC for mandatory convertibles where the issuer has the option to settle deferred interest in cash or shares on conversion, or 50% EC if settlement must be in cash.

The actual impact on EC and credit metrics can only be assessed when all instrument features are considered in the full analytical process by a rating committee.