2004 was a down year for Canadian structured finance issuance, which dropped 24% in volume and 16% in value from 2003, according to a new report from Moody’s Investors Service.

“The drop in volume can be largely attributed to a number of one-off large loan transactions in the commercial mortgage-backed securities (CMBS) sector in 2003 that were not repeated in 2004, as well as the absence from the market of a couple of large credit card issuers who had executed transactions in 2003,” says Sumant Inamdar, Moody’s Toronto-based analyst and co-author of the report.

The largest decline in asset-backed securities volume was in the credit card sector. Issuance fell by almost 27% to $4.3 billion from almost $6 billion in 2003. Card issuance made up 57% of total non-CMBS issuance, which is similar to 2002, and quite a bit less compared to 2003 when credit cards made up 67% of the market, Inamdar says. Moody’s anticipates volume in the credit card sector to remain flat compared to 2004, at approximately $4 billion issuance.

“Issuance in the auto-loan securitization sector was the closest thing to a shining star amongst non-CMBS assets. Overall, term auto issuance was flat compared to 2003 at approximately $2.2 billion, making the auto sector the only one that did not see a volume decline in 2004,” the analyst says. “Moody’s expects that although issuance may fall just short of 2004 levels, depending on some of the variables discussed here, there is a chance volume could remain flat or even see marginal growth in the range of $1.6 billion to $2.4 billion issuance,” Inamdar says.

For 2005, Moody’s forecasts Canadian structured finance issuance to grow 5% to between $10.5 billion and $11.5 billion, up from $10.1 billion in 2004.

“Moody’s expects overall issuance in 2005 to experience reasonable growth fueled largely by CMBS, which should increase by 20% to 30% to about $3 to $3.5 billion issuance, with some growth in residential mortgage-backed securities (RMBS) and other asset-backed securities (ABS), totaling about $7.5 to $8.0 billion cumulative issuance,” says Charles Gamm, Moody’s Toronto-based analyst and co-author of the report.

“The strong CMBS growth is attributed to continued execution of fusion and conduit transactions, the anticipated return of CDPQ (Caisse de Depôt et placement du Quebec) to the market after a year long absence and the establishment of Royal Bank’s new conduit, REAL-T, as a regular issuer in the market,” Gamm says.