Coventree Reports First Quarter 2008 Financial Results and Discusses Business Outlook



    Toronto Stock Exchange Symbol: COF

    TORONTO, Feb. 12 /CNW/ - Coventree Inc. (TSX: COF) ("Coventree" or the
"Company") today announced its financial results for the three months ended
December 31, 2007. All amounts are reported in Canadian dollars.
    Coventree's financial results for the three months ended December 31,
2007 were materially adversely affected by the disruption in the Canadian
asset-backed commercial paper ("ABCP") market that began on August 13, 2007
and still continues today (the "Market Disruption"). The impact of the Market
Disruption on the Company's current and future financial results is discussed
in detail in the Management's Discussion & Analysis and unaudited Consolidated
Financial Statements for the three months ended December 31, 2007, which are
available under the "Coventree Owners" section of the Company's website at
www.coventree.ca and have been filed on SEDAR at www.sedar.com.

    Financial Highlights
    --------------------

    Results Excluding VIEs (non-GAAP)

    
    -   Net income excluding VIEs of $3.1 million for the three months ended
        December 31, 2007 (December 31, 2006 - $6.1 million)
    

    For the three months ended December 31, 2007, Coventree's net income
excluding VIEs was $3.1 million compared to $6.1 million for the three months
ended December 31, 2006. Total revenue excluding VIEs for the quarter ended
December 31, 2007 decreased to $11.0 million compared to $21.8 million in the
quarter ended December 31, 2006. Operating expenses for the first quarter of
fiscal 2008 decreased $5.6 million compared to the same quarter in fiscal
2007. This decrease was primarily a result of lower compensation and benefits
expenses, cost reduction measures announced by the Company on September 18,
2007, and non-recurring expenses incurred in the first quarter of fiscal 2007
related to the Company's initial public offering.

    Results Including VIEs (GAAP)

    
    -   Net income including VIEs of $3.1 million for the three months ended
        December 31, 2007 (December 31, 2006 - $45.2 million)
    

    Under generally accepted accounting principles ("GAAP"), the Company
consolidates certain variable interest entities ("VIEs"), such as the ABCP
conduits sponsored by Coventree and a number of special purpose vehicles,
which the Company was determined to be the primary beneficiary. However,
Coventree has no right to the VIEs' income or assets, and the losses and
liabilities of the VIEs (including the ABCP issued by Coventree-sponsored
conduits) are not the losses and liabilities of Coventree. As a result, the
Company believes that some GAAP financial measures, including net income, do
not accurately measure the performance of its business. The Company uses
certain non-GAAP financial measures that it believes are better measures of
its financial performance.
    The consolidated net income of the Company under GAAP of $3.1 million for
the three months ended December 31, 2007, is equal to net income excluding
VIEs. With the implementation of the new financial instruments accounting
standards on October 1, 2006, Coventree has measured all financial assets and
financial liabilities at fair value. As a result of the Market Disruption, the
Company determined the fair value of the Trusts asset-backed limited recourse
notes issued by the Coventree-sponsored ABCP conduits to equal the fair value
of the VIEs' net assets as a result of the Montreal Accord, it is expected
that substantially all of the cash flows of the investments held by the
relevant Conduits will be the only cash flows available to settle the cash
flows of the respective Trusts asset-backed limited recourse notes. As a
result of this valuation method for the Trusts asset-backed limited recourse
notes, their fair value has been decreased by an amount equal to the decrease
in the VIEs' net assets as at December 31, 2007 from September 30, 2007, with
the result that there is no impact to net income for the VIE business segment.
This reduction in fair value is not representative of the current value of the
ABCP or other notes issued by an individual conduit since it is an average for
all series determined across all Coventree-sponsored conduits and is at
December 31, 2007. As at December 31, 2007, the fair value of the Trusts
asset-backed limited recourse notes was approximately 85% of their original
issue value plus accrued interest (September 30, 2007 - approximately 93%).
Although the Company believes its valuation methods are reasonable and
appropriate in the circumstances, the ultimate net realizable values or future
market values may vary significantly if other reasonably possible alternative
assumptions were used or on the outcome of the Investors Committee
restructuring proposal as discussed below.

    Business Outlook
    ----------------

    The special committee established by the Company's board of directors in
response to the Market Disruption ("Special Committee") has reviewed and
considered the future viability of each of the Company's three existing
business units and has concluded that (a) regardless of whether the
Pan-Canadian Investors Committee (the "Investors Committee") restructuring
proposal is implemented or not, the Capital Markets business unit is no longer
viable (b) as a result of the decision of the Investors Committee to appoint
another entity as the post-restructuring administrator and asset manager, the
Administration business unit is no longer viable and (c) no further
investments will be made under the Investments business unit. The Special
Committee believes that it is in the best interests of the Company, its
various stakeholders and the ABCP conduits sponsored by Coventree that the
Company continue to cooperate with and support the efforts of the Investors
Committee to restructure the third party ABCP market and to continue to
perform its responsibilities as administrator of the conduits sponsored by
Coventree and others. In addition, pending the Investors Committee's
restructuring proposal, the Special Committee is not and will not actively
pursue any strategic options for the Company that would result in it having
ongoing operations. Accordingly, provided that a Committee Restructuring
Proposal is implemented on the terms that are satisfactory to the Company
having regard to its current rights, obligations and circumstances, it is
expected that the Company will seek an orderly windup of its operations and,
in conjunction therewith, the distribution to shareholders of any remaining
funds after setting aside appropriate amounts to cover the Company's expected
future costs and liabilities, including known contingent and other related
liabilities. Although it is expected that the proposed restructuring will
proceed, there can be no assurance that it will be completed or, if it is
completed, it will be completed on the terms that have been proposed by the
Investors Committee.
    The Company's revenue has been, and is expected to continue to be,
significantly reduced as result of the Market Disruption. In addition, as a
result of recent reductions in interest rates, the Company's revenues may no
longer cover its expenses. The Company is exploring options for further
expense reductions as a result of the Investors Committee's decision not to
appoint Coventree as the post-restructuring administrator and asset manager.
However, Coventree's revenue is and will continue to be subject to fluctuation
and to certain risks and uncertainties as described in the Company's MD&A for
the three months ended December 31, 2007. As a result, there can be no
assurance that Coventree's revenue will continue to be sufficient to cover the
costs of continuing to support the restructuring efforts of the Investors
Committee and to perform its responsibilities as administrator of the conduits
sponsored by Coventree and others.

    About Coventree
    ---------------

    Prior to the Market Disruption, Coventree was a financial services
company that focused on specialized niches. Coventree's principal business
operations are currently in two business segments - Coventree Capital & Admin
and Coventree Investments. Coventree Capital & Admin is comprised of two
businesses, the Capital Markets business and the Administration business.
Prior to the Market Disruption, the Capital Markets business specialized in
structured finance using securitization-based funding technology. The
Administration business provides services to ABCP trusts sponsored by the
Company and by third parties. Prior to the Market Disruption, Coventree
Investments made strategic investments in synergistic businesses.

    %SEDAR: 00024386E




For further information:

For further information: Craig Armitage, The Equicom Group Inc., Tel:
(416) 815-0700 x278, Email: carmitage@equicomgroup.com

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Coventree Inc.

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