February 7, 2008 / 3:56 PM / in 10 years

UPDATE 1-Canaccord takes writedown, says cautious on outlook

(Recasts, adds details)

TORONTO, Feb 7 (Reuters) - Canaccord Capital Inc CCI.TO announced on Thursday a third-quarter writedown of C$4.2 million related to the nonbank asset-backed commercial paper market, and said it remains “cautious” on its outlook for the near term.

That makes for a total of C$8.6 million in adjustments Cannacord has made for securities held in the seized-up ABCP market. The company said the third-quarter adjustment was “to reflect management’s view of current market conditions and the limited liquidity for these notes.”

“It was again a challenging quarter marked by volatile global markets, so we’re pleased to have emerged profitably and successfully,” Chief Executive Paul Reynolds said in a statement. “That said, we’re definitely cautious in our current outlook for the near term.”

Vancouver, British Columbia-based Canaccord said its clients continue to hold approximately C$269 million worth of ABCP notes, while the company holds a fair value of about C$34.5 million in ABCP.

The company said it adjusted the value of its ABCP holdings to reflect expected future cash flows following an agreement in principle on restructuring the market reached by a committee that has been put in charge of fixing the damaged segment of Canada’s commercial paper market.

The ABCP market seized up last summer amid a global credit crunch as investors began to worry about exposure to the faltering U.S. subprime mortgage market.

Canaccord said the writedown had taken a bite out of its profit for the quarter. Net income was C$15 million, or 31 Canadian cents a share, for the three months ended Dec. 31, down from C$23.7 million, or 49 Canadian cents a share, in the same period the year before.

Excluding the writedown, net income was C$17.8 million, or 36 Canadian cents a share, the company said.

Revenue was up 2.8 percent at C$183.3 million.

Canaccord said it expects the restructuring of the market to be complete by the end of March and that some trading will start shortly after.

Shares of Canaccord were 20 Canadian cents, or 1.6 percent, lower at C$12.64 on Thursday morning on the Toronto Stock Exchange.

$1=$1.01 Canadian Reporting by Leah Schnurr; Editing by Peter Galloway

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