TORONTO (Reuters) - An $18.5-million writedown related to Canada’s asset-backed commercial paper (ABCP) market pushed Xceed Mortgage Corp (XMC.TO) to a net loss in the fourth quarter, the small alternative lender said on Thursday.
Xceed lost $22.5 million, or 79 cents a share, in the period ended October 31. That compares to earnings of 23 Canadian cents a share a year earlier.
The company’s stock is down more than 60 percent since early August, just before shock waves from the U.S. subprime mortgage market crisis spread to Canada’s ABCP market.
On Aug 13, niche finance firm Coventree Inc COF.TO, one of Xceed’s main sources of funding, said it was unable to place new asset-backed commercial paper that was to fund previously-issued paper.
“That announcement set off a period of extreme capital market turbulence in Canada. The effects are still being felt,” Ivan Wahl, Xceed’s chief executive, said in a statement on Thursday.
“The financial results for the fourth quarter ... that we are today reporting do not meet the expectations we had last summer.”
Toronto-based Xceed offers uninsured high-ratio mortgages for single-family homes through brokers and bank referrals.
As Coventree rolled over its extendable ABCP — and Xceed’s mortgage portfolio became funded by extendable ABCP at wider credit spreads — Xceed took the $18.5-million after-tax valuation writedown of deferred net mortgage interest receivable.
“In determining the amount of the writedown, we assumed that the increased credit spreads will continue over the full term of the mortgages affected,” Wahl said.
The firm’s revenue in the quarter dropped 65.7 percent to $5.3 million, reflecting hampered mortgage sales.
The company expects to enhance profitability “as the capital market settles down.”
Reporting by Jonathan Spicer; Editing by Bernadette Baum