A new report from Moody’s predicts that that Canadian structured finance issuance in 2004 will be about 5% higher than 2003, or between $C12 billion and $C13 billion.
Most of the projected growth will come from commercial mortgage-backed securities (CMBS), which Moody’s says will likely grow 20%-30% over the C$3.3 billion issued in 2003, as the market continues to attract more participants in the coming year.
“The dramatic pace of growth in 2003 of the term asset-backed securities (ABS) market, driven by the participation of Canada’s largest domestic banks in the credit card ABS market, is not expected to continue into 2004,” says Moody’s Toronto-based analyst Charles Gamm, author of the report.
Drawn to the market in advance of pending accounting rule changes, Canada’s Schedule I banks will likely be less active in 2004, says Moody’s. Other ABS market segments are expected to continue their growth, but the size of the entire term ABS market will be limited by the lack of many Schedule I credit-card transactions.
In ABS, 2003 issuance more than doubled that of 2002, reaching nearly C$12 billion, which was fuelled by strong growth in the credit card ABS and CMBS sectors.
The non-CMBS asset-backed securities market saw marked growth in 2003 of approximately C$8.7 billion issuance, exceeding 2002 volume by nearly 150%.
This ABS growth was led by credit-card receivable- backed issuance, which jumped by 215% over 2002, while auto related issuance, including lease, retail and dealer floor plan transactions, climbed 160% over 2002.
“The Canadian ABS market seems to be maturing, as greater volume has caught up with the breadth of the market,” says Gamm. “In 2003, new structures were introduced to the market, adding further depth to a market already demonstrating a good variety of asset types and issuers, and diverse ranges of structures to meet investor appetites as well.”
In other structured -finance segments, Canadian asset-backed commercial paper (ABCP) market had another modest year, with outstandings at year-end totalling approximately C$62.1 billion, a 2% decrease from the 2002’s C$63.4 billion.