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Securitization - A Comeback on Both Sides of the Border

On the tape (Globe and Mail):

Canada's securitization market is coming back to life along with that in the U.S., with GMAC filing to sell $1.7-billion of auto receivables and a full pipeline for coming weeks.

There appears to be a rush to get a few more deals done before Canadian government support for the market ends, though those in the business expect that even after federal backstop disappears the securitization business is strong enough to stand on its own.

GMAC on Thursday filed a prospectus for the Canadian SWIFT Master Auto Receivables Trust to issue as much as $1.7-billion of asset-backed securities over the next two years.

It's one of a number of auto deals expected to come in the next few weeks before the federal Canadian Secured Credit Facility expires on March 31. The CSCF is designed to enable the government to purchase ABS, giving issuers the confidence to try the market.

"It’s fair to say that the Canadian market is resurgent, in part because of the support of the CSCF," said Jerry Marriott, a managing director at DBRS Inc. who focuses on asset-backed securities. "We don’t know what level it’s going to achieve, but we’ve certainly seen improvement."

In the U.S., the jump in securitizations has been dramatic, in large part thanks to the TALF backstop that Washington provided. According to figures published Friday by Thomson Reuters, there were $6.4-billion (U.S.) of securitization deals this week, the busiest week since September.

All told, securitizations in the U.S. are up 413 per cent in 2010 from the comparable period last year.

This is very good news for regulators as they look for non-bank finance to get up and running again, providing loans and financing to areas like the auto and heavy equipment businesses.

Personally, I think this is good news for the securitization market (non-MBS).  The demand for such deals indicates investor appetite for the product.  Always remember, if this is your asset class and you can't get any done, capital will be allocated to other classes. 

I thin we will continue to see a thaw in this market.

Disclosure: no positions in securitized investments, positions in isuers such as GMAC and FMCC