TORONTO, Jan. 21 /CNW/ - Xceed Mortgage Corporation (TSX: XMC) ("Xceed"
or the "Corporation"), a Canadian provider of insured mortgages, today
announced that the closing of the restructuring plan for asset-backed
commercial paper ("ABCP") now enables Xceed to estimate how this will
positively benefit the Corporation's financial results.
Xceed has realized a positive impact of about $4.77 million in its cash
flow and on its pre-tax income ($3.2 million after-tax) on the closing of the
Further, with the restructuring of the ABCP, Xceed expects an improvement
in the cost of funds for about $773 million of the approximately $2.1 billion
of mortgages that the Corporation has under administration. When the market
for third-party ABCP collapsed in August 2007, the securitization agent was
required to extend the term and increase the cost of funds of the extendible
ABCP assets. Accordingly, the deferred net mortgage receivable for the fiscal
year ended October 31, 2007 was reduced to reflect the valuation at that time.
Xceed now expects, based on December 31, 2008 outstanding principal
balance, to increase the deferred net mortgage interest receivable by between
$4 million and $5 million on a pre-tax basis ($2.7 million and $3.3 million on
an after-tax basis). These changes will be reflected in the financial results
of the Corporation's fiscal first quarter ending January 31, 2009. This will
also result in an improvement in the Corporation's cash flow of approximately
$200,000 to $250,000 per month starting February of 2009 for an estimated
period of 20 months.
Xceed's profitability is directly affected by the spread margins
associated with its mortgage product offerings. The cost to fund the portfolio
is one element in the valuation of the deferred net mortgage interest
receivable on its balance sheet. Continued market volatility and unprecedented
developments in the capital markets, which contributed to the dramatic
declines in interest rates during the fiscal first quarter of 2009, will
continue to impact the valuation of Xceed's deferred net mortgage interest
"The resolution of the ABCP restructuring certainly is a welcome and
positive development for Xceed as it is for investors and for capital
markets," said Ivan Wahl, Chairman and Chief Executive Officer.
"At the same time," he continued, "this resolution unfortunately does not
change the fact that it still is not possible for Xceed or others to
securitize uninsured mortgages, as we did in the past. We hope that new
financing vehicles eventually will be created that will enable us to return to
our past focus of offering non-traditional mortgages to those Canadians who
should be able to access such funding to buy homes. Meanwhile, we will
continue to originate and renew only those mortgages that are insurable and
qualify for sale to the Canada Mortgage Bond Program. Further, the capital
markets remain very volatile and the outlook for interest rates is uncertain.
It is not clear how this may affect Xceed's financial performance over the
course of fiscal 2009 and perhaps into fiscal 2010."
Xceed Mortgage Corporation, based in Toronto, is a Canadian provider of
insured residential mortgages that it originates in Canada. The Corporation
has approximately $2.1 billion of mortgages and other assets under
administration. Xceed's shares are traded on the Toronto Stock Exchange (TSX:
XMC). To find out more about Xceed Mortgage Corporation, visit our website at
Forward-looking statements in this document are based on current
expectations that are subject to significant risks and uncertainties. Actual
results might differ materially due to various factors such as the competitive
nature of the mortgage industry, the ability of Xceed to continue to execute
its growth and development strategy, and the reliance of Xceed on key
personnel. Xceed assumes no obligation to update these forward-looking
statements, or to update the reasons why actual results could differ from
those reflected in these. Additional information identifying risks and
uncertainties is contained in Xceed's regulatory filings available on its
website and at www.sedar.com.
For further information:
For further information: Investor and Media Relations: Richard Wertheim,
Wertheim + Company Inc., (416) 594-1600 or (416-518-8479 cell),