TORONTO, June 12 (Reuters) - Xceed Mortgage Corp (XMC.TO) reported a quarterly loss on Thursday, largely due to costs related to restructuring its business away from risky nontraditional loans, to safer, but lower-margin insured mortgages.
The small Canadian lender has been struggling since the market in Canada for third-party asset-backed-commercial paper, one source of Xceed’s financing, seized up nearly a year ago, but said it expected to return to profitability in the second half of the year.
Since the turmoil began, the company’s stock has fallen around 80 percent, it has laid-off around 100 employees, including its president and its chief financial officer, and it has cut back on office space.
“In total, Xceed recorded in the 2008 second quarter unusual pre-tax charges related to these cost-reduction measures of C$10.2 million comprising severance and terminations costs, a deferred charge write-down, a write-down of fixed assets, and lease costs,” Ivan Wahl, Xceed’s chief executive, said in a release.
He said the measures are expected to result in annualized after-tax savings of about C$10 million to C$13 million.
Xceed lost C$16.7 million in the second quarter ended April 30, or 60 Canadian cents a diluted share, compared with a profit of C$4.7 million, or 16 Canadian cents a diluted share, for the same time last year.
Cash flow from operations, adjusted for unusual items and financing charges, for the second quarter was C$200,000, or 1 Canadian cent per diluted share, compared with C$5.6 million, or 19 Canadian cents per diluted share in the 2007 quarter.
Xceed said the disruptions in the ABCP market led to higher costs in its trust vehicles during the quarter.
The firm said its revenue for the quarter was C$2.6 million, down from C$16.4 million in the year-ago quarter, due to a lower level of mortgage sales and lower securitization income.
The company said it retired C$295 million of maturing notes issued by Xceed Mortgage Trust by negotiating around C$168.2 million of funding and using C$126.8 million of mortgage collections.
It said, however, the interest costs of the refinancing were substantially higher than when the notes were sold, leading to an after-tax write-down of C$1.8 million. ($1=$1.02 Canadian) (Reporting by John McCrank; Editing by Scott Anderson)