The growing U.S. housing recovery is ‘credit positive’ for timber revenue securitizations, according to Moody’s Investors Service.
This is because the increasing demand for wood products from a rebound in housing construction will boost flows to timber revenue ABS, said analysts in a report today.
Stronger housing starts is lifting consumption of lumber, plywood and other wood materials, feeding into an upsurge in harvest levels and sales volumes, as well as modest increases in timber prices, according to the report.
Harvest levels on timberlands that Timberstar owns almost doubled in April 2013 to 300,000 tons, from a low of nearly 150,000 tons in April 2009. As a result, the company's securitization of timberlands in the southern U.S. will benefit from stronger sales volumes and a modest price recovery. As of April 2013, Timberstar Trust I, Series 2006-1 has an outstanding balance of $800 million, with ratings ranging from 'Aa1' to 'B1.'
Housing starts are expected to hit 950,000 in 2013 and 1.25 million in 2014, up from the lows of about 530,000 in 2009.
However, Moody’s did note that timber prices will not recover by the same magnitude in every region of the U.S., with timber inventories in the Pacific Northwest seeing quicker price increases than those in the South.