DBRS Releases April Canadian Securitization Market Overview Report

DBRS has today released the Canadian Securitization Market Overview report for the month ended April 30, 2013. The report provides an overview of the total Canadian securitization market, which includes asset-backed securities (ABS), commercial mortgage-backed securities (CMBS), asset-backed commercial paper (ABCP) and structured notes.

As of April 30, 2013, the total amount outstanding in the Canadian securitization market rose to $97.9 billion, an increase of $0.9 billion month-over-month. Overall market growth was driven by the term ABS market, with multiple issuances in the credit card space and a private placement by CNH Capital Canada Receivables Trust. The ABCP market remains active as well, with three new deals added to conduits during the month.

DBRS recently confirmed the ratings on all outstanding equipment finance term deals. The amount of losses experienced by the collateral backing the notes issued by CNH Capital Canada Receivables Trust and by CIT Canada Equipment Receivables ULC has been low and has been absorbed by the excess spread. Credit enhancement for all deals continues to grow as the respective pool of assets amortizes, resulting in higher credit protection to the noteholders. The increase in credit enhancement coverage of expected remaining losses for CNH Capital Canada Receivables Trust, Series 2011-1 warranted an upgrade of the rating of the Class B Notes to AA (sf) from A (sf).

Overall, consumer lending and wholesale financing securitizations continue to perform well and within DBRS’s expectations. The economic outlook has improved compared to a year ago, with a lower unemployment rate, a stable number of filings for bankruptcy, modest GDP growth and consumers trying to curb their level of indebtedness.

On May 29, 2013, DBRS published a commentary entitled “Recalibrated, Canadian Plastic Marches On,” providing insight on current trends and developments in the Canadian credit card and consumer lending industry. The commentary can be found under Related Research at the right of the screen.

On May 31, 2013, DBRS published a study on Canadian Retail Auto Loan Securitizations, titled “Loooooooong-Term Loans: Under the Microscope.” The study provides insight on the various risks associated with retail auto loan contracts: the economy, the used vehicle market and the underlying contracts. As expressed in the study, “Despite a continued rise in household debt, most Canadian auto consumers continue to meet their payment obligations as losses on securitized transactions trend down from their 2008 peak. The strong performance of Canadian retail auto loan transactions in recent years can be attributed to improving economic indicators and the strength of the used vehicle market.” In this study, DBRS presents a toolkit to analyze the effects and relative risks of portfolios to changing pool characteristics (contract term, loan-to-value and annual percentage rate) and a fluctuating used vehicle market. The study can be found under Related Research.

In April 2013, term ABS and CMBS represented 42.1% of the total Canadian securitization market, followed by structured floating-rate notes (FRN) at 28.9%, ABCP at 28.0% and private placements at 1.0%. From April 2012 to April 2013, ABS outstanding notes (including CMBS) decreased by $0.4 billion, while outstanding ABCP decreased by $1.4 billion and private placements rose by $524 million.

The Canadian securitization market (excluding structured FRNs and private placements) continued to be dominated by credit cards, which accounted for 39.4% of the total market. Auto-related transactions accounted for a 16.5% share in April, followed by commercial mortgages at 14.9% and residential mortgages at 11.9%.

Notes:
All figures are in Canadian dollars unless otherwise noted.