TORONTO, May 25, 2012 /CNW/ - Coventree Inc. ("Coventree" or the "Company") today announced its financial results for the three months ended March 31, 2012. All amounts are reported in Canadian dollars.
Effective February 15, 2012, Coventree changed the basis for presentation of its consolidated financial statements from going concern to liquidation in accordance with Canadian generally accepted accounting principles for companies that are being wound up. Under the liquidation basis of accounting, the Company's financial position is presented in the consolidated statement of net assets in liquidation and the results of the Company's operations are presented in the consolidated statement of changes in net assets in liquidation. Costs expected to be incurred during the winding up, including administrative costs and professional fees expected to be incurred in future periods until the winding up of the Company is completed, are accrued in the consolidated statement of net assets in liquidation. As a result of this change in the basis of presentation, information as at dates or for periods ending on or after February 15, 2012 will not be comparable to information as at prior dates or for prior periods.
Coventree recorded an accrual of $5.3 million for future liquidation and administrative costs as at February 15, 2012 as a result of the change in the basis of presentation of its consolidated financial statements from going concern to liquidation. Of this amount, $4.1 million is included in accounts payable and accrued liabilities on Coventree's consolidated statement of net assets in liquidation as at March 31, 2012.
Coventree's net loss for the three months ended March 31, 2012 was $3.3 million, compared to a net loss of $0.3 million for the same period in the previous fiscal year.
Total revenue for the three months ended March 31, 2012 was $0.2 million, compared to $0.3 million for the comparable period in the previous fiscal year. The Company's primary source of revenue was interest income earned on cash and cash equivalents.
Operating expenses for the period from January 1 to February 14, 2012 on a going concern basis were $2.3 million. Operating expenses for the period from February 15 to March 31, 2012 on a liquidation basis were $2.2 million. As a result, operating expenses for the three months ended March 31, 2012 were $4.5 million compared to $0.6 million for the same period in the previous year. This increase is mainly the result of (a) $2.2 million in income tax expense recorded in the period from February 15 to March 31, 2012, of which $1.1 million was recorded as a write-off of income taxes receivable and $1.1 million was recorded as accrued income taxes payable, and (b) $2.0 million in other administration expenses recorded during the period from January 1 to February 14, 2012 in respect of other possible taxes payable.
For the three months ended March 31, 2012, there was a $1.1 million unrealized pre-tax gain on its investment in shares of Xceed Mortgage Corporation ("Xceed") compared to an unrealized pre-tax gain of $0.3 million for the same period in the previous fiscal year.
As at March 31, 2012, the Company had cash and cash equivalents of $65.3 million, or approximately $4.31 per share. As at that date, the Company's net assets in liquidation per share were approximately $4.00 per share. On May 4, 2012, the Company made a pro rata interim distribution to shareholders comprised of $44.5 million in cash and all of the 2,661,449 shares of Xceed owned by Coventree. The cash component of the distribution was approximately $2.94 per share and included a return of capital in the amount of $0.46 per share. The Xceed shares were valued at $1.49 per share for purposes of the distribution, and Coventree shareholders received approximately 0.175 shares of Xceed for each share of Coventree held. As a result, the total value of the interim distribution to Coventree shareholders was approximately $3.20 per share.
The Company's Management Discussion and Analysis and unaudited consolidated financial statements for the three months ended March 31, 2012 will be available on the Liquidator's website at www.duffandphelps.com/restructuringcases, the Company's website at www.coventree.ca and on SEDAR at www.sedar.com.
D&O Insurance Claim Update
Coventree is also providing an update on the previously announced appeal of the decision of Superior Court of Justice ("Ontario") (the "Court") by Navigators Pro, on behalf of Lloyds Syndicate 1221 (Millenium Syndicate) (collectively, "Navigators Pro"), in connection with Coventree's claim for coverage under its directors and officers liability insurance policy with Navigators Pro.
Coventree's view of the Navigators Pro policy is that it provided coverage to a limit of $5 million for the matters that were the subject of the notice of hearing and related statement of allegations issued by Ontario Securities Commission staff dated December 7, 2009 (the "Notice of Hearing"). After Navigators Pro took the position that it had no obligation under the policy to provide coverage in respect of the claims made against Coventree and the individuals named in the Notice of Hearing, the Company commenced proceedings against Navigators Pro in respect of its claim under the policy. The Court ruled that the Navigators Pro policy was operative and must respond to the claim made by Coventree for coverage under that policy. Navigators Pro appealed that decision to the Ontario Court of Appeal. The Ontario Court of Appeal released its decision on May 24, 2012 and affirmed the lower Court's ruling. Navigators Pro has 60 days to seek leave to appeal to the Supreme Court of Canada. As a result, until the time period for the filing of a leave application has passed or, if a leave application is filed, until the appeal has been resolved, there can be no assurance regarding when Navigators Pro will pay under the policy nor as to whether Navigators Pro will be liable to provide coverage at all.
This press release is intended for distribution in Canada only.
For further information:
Duff & Phelps Canada Limited
Tel: (416) 932-6225