DBRS Releases May Canadian Securitization Market Overview Report

DBRS has today released the Canadian Securitization Market Overview report for the month ended May 31, 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 May 31, 2013, the total amount outstanding in the Canadian securitization market fell to $96 billion, a decrease of $1.9 billion month-over-month. This is a result of a decline in the overall ABS market size, with three credit card and one floorplan deal fully repaid in the month. Despite a month-over-month decline in the overall market size, ABCP issuance remains strong and above levels witnessed over the past five years.

In the month, DBRS published a commentary on the performance of Canadian credit card securitizations in the first quarter of 2013. Key performance metrics, as measured by DBRS, have remained stable, both quarter-over-quarter and year-over-year. Average loss rates continued downward, ending at 3.8%, while average payment rates have increased by approximately 87 basis points (bps) year-over-year and gross yield levels saw a slight uptick of 4 bps year-over-year, ending at 21.3%.

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 observed 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 June, DBRS confirmed and, in one case, upgraded the ratings of all outstanding auto loan term deals. The losses experienced by the collateral backing the notes for both Ford Auto Securitization Trust (FAST) and Canadian Capital Auto Receivables Asset Trust (CCARAT) have been lower than expected and absorbed by the excess spread available. In addition, credit enhancement for all deals continues to grow as each respective pool of assets amortizes, resulting in high credit protection to the noteholders. The increase in credit enhancement coverage, based on expected remaining losses, warranted an upgrade for CCARAT II Auto Loan Receivables-Backed Notes, Series 2011-1, Class C to A (sf) from A (low) (sf).

In May 2013, term ABS and CMBS represented 40.4% of the total Canadian securitization market, followed by structured floating-rate notes (FRN) at 29.5%, ABCP at 29.2% and private placements at 1.0%. From May 2012 to May 2013, ABS outstanding notes (including CMBS) decreased by $2.8 billion, while outstanding ABCP decreased by $1.3 billion and private placements rose by $544 million.

The Canadian securitization market (excluding structured FRNs and private placements) continued to be dominated by credit cards, which accounted for 37.7% of the total market. Auto-related transactions accounted for a 16.9% share in May, followed by commercial mortgages at 15.1% and residential mortgages at 12.6%.

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

The full report is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.