Coventree Reports Third Quarter 2008 Financial Results



    Toronto Stock Exchange Symbol: COF

    TORONTO, Aug. 1 /CNW/ - Coventree Inc. (TSX: COF) ("Coventree" or the
"Company") today announced its financial results for the three and nine months
ended June 30, 2008. All amounts are reported in Canadian dollars.
    Coventree's financial results for the three and nine months ended June
30, 2008 have been, and continue to be, materially adversely affected by the
disruption in the Canadian asset-backed commercial paper ("ABCP") market that
began on August 13, 2007 (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 and nine months ended June 30, 2008, which
will be available under the "Coventree Owners" section of the Company's
website at www.coventree.ca and will be filed on SEDAR at www.sedar.com.

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

    
    -  Net income of $0.4 million and $9.4 million for the three and nine
       months ended June 30, 2008 (compared with net loss excluding VIEs of
       $2.6 million and net income of $10.1 million for the three and nine
       months ended June 30, 2007)
    

    For the three and nine months ended June 30, 2008, Coventree's net income
in accordance with generally accepted accounting principles ("GAAP") was 
$0.4 million and $9.4 million, respectively, compared to net loss excluding
VIEs of $2.6 million and net income of $10.1 million for the same periods in
the previous year.
    Total revenue excluding VIEs for the three and nine months ended June 30,
2008 was $4.9 million and $33.6 million, respectively, compared with
$18.8 million and $61.3 million in the same periods last year as the Company
continues to be negatively impacted by the Market Disruption. Revenue
continues to be affected by the virtual elimination of revenue from credit
arbitrage transactions based on the decline in interest rates. Operating
expenses excluding VIEs for the three and nine months ended June 30, 2008 of
$3.9 million and $15.1 million decreased $12.5 million and $27.3 million,
respectively, compared to the same periods in the previous year. Most of the
reduction is due to lower compensation and benefits expense as there are fewer
employees and no long-term incentive accrual under either of the current or
previous compensation plans.
    In prior reporting periods, the Company's consolidated financial
statements included the accounts of the variable interest entities ("VIEs") of
which the Company was considered the primary beneficiary in accordance with
GAAP. As previously announced, as a result of the application filed by the
Pan-Canadian Investors Committee (the "Investors Committee") under the
Companies' Creditors Arrangement Act (the "CCAA") on March 17, 2008, the
Company concluded that a reconsideration event occurred on that date. As such,
Coventree reassessed its VIEs and determined that it is no longer the primary
beneficiary of the VIEs, which resulted in the Company no longer being
required under GAAP to consolidate the VIEs as of March 17, 2008. Accordingly,
the VIEs' assets and liabilities were not consolidated after March 16, 2008,
and results for the three months ended June 30, 2008 do not include VIEs but
results for the nine months ended June 30, 2008 include VIEs up to March 16,
2008; however, the consolidated net income of the Company under GAAP for the
nine month period ended June 30, 2008 is equal to the net income excluding
VIEs for that period.

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

    As previously announced, provided that the restructuring plan proposed by
the Investors Committee (the "Restructuring Plan") is implemented on 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 wind down of its operations and, in conjunction therewith, the
distribution to shareholders of remaining funds after setting aside
appropriate amounts to cover the Company's expected future costs and
liabilities, including known contingent and other related liabilities.
    Implementation of the Restructuring Plan is subject to, among other
things, sanction by a final order of the Ontario Superior Court of Justice
(the "Court") under the CCAA filing. The Restructuring Plan was sanctioned by
a final order of the Court as required under the CCAA filing on June 5, 2008.
Certain investors in the outstanding ABCP subject to the Market Disruption
(the "Affected ABCP") sought leave to appeal that final order to the Ontario
Court of Appeal, and argument on both the application for leave to appeal as
well as the appeal itself was heard by the Ontario Court of Appeal on June 26
and June 27, 2008.
    There can be no assurance that the Restructuring Plan will be
implemented. The Investors Committee has advised that implementation of the
Restructuring Plan is subject to a number of conditions, including
implementation of the Restructuring Plan by order of the Court, execution of
definitive legal agreements and satisfactory due diligence and receipt of
internal approvals by dealer bank asset providers. As noted above, although
the Court issued an order approving the Restructuring Plan in principle,
certain investors in the Affected ABCP have sought leave to appeal that
decision to the Ontario Court of Appeal. Accordingly, there can be no
assurance that the order of the Court, will not be reversed or modified by the
Ontario Court of Appeal or, if modified or upheld, that the Plan will include
comprehensive releases in respect of all legal claims that might be asserted
against Coventree in respect of its role as sponsor, administrative agent and
financial services agent for the Coventree-sponsored ABCP conduits.
    Accordingly, the timing of any orderly wind down of the Company and the
amount and timing of any distribution of funds to shareholders is currently
unknown. As noted above, a number of factors, some of which are beyond the
Company's control, could affect the timing of a wind down or the amount of
funds available for distribution.

    Forward-Looking Statements

    This press release includes forward-looking statements relating to the
Company's expectation to seek an orderly wind down of its operations. These
statements can be identified by the expression "expected". The forward-looking
statements are not historical facts but reflect Coventree's current
expectations regarding future events based on information currently available
to Coventree. This press release is intended for distribution in Canada only.
    These forward-looking statements are subject to a number of known and
unknown risks, uncertainties and assumptions. Many factors could cause actual
results, performance or events to differ materially from current expectations
that may be expressed or implied by such forward-looking statements,
including, without limitation, the matters discussed under "Risk and
Uncertainties" contained in the Company's Management's Discussion & Analysis
for the third quarter ended June 30, 2008 which will be available under the
Company's profile on SEDAR at www.sedar.com. Should one or more of these risks
or uncertainties materialize, or should assumptions underlying the
forward-looking statements prove incorrect, the Company may not seek an
orderly wind down on the terms set out herein or at all. These factors should
be considered carefully and prospective investors should not place undue
reliance on the forward-looking statements. These forward-looking statements
are made as of the date of this press release and Coventree does not intend,
and does not assume any obligation, to update or revise these forward-looking
statements, except as may be required by law.

    %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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