TORONTO, Aug. 14 /CNW/ - Xceed Mortgage Corporation (TSX: XMC), a leading
non-traditional mortgage lender, today issued the following statement
regarding trading activity in its shares on August 13 and its funding
facilities for its existing portfolio of mortgages and new originations:
On Monday afternoon, August 13, Coventree Inc., which serves as Xceed's
securitization agent for its medium-term commercial paper funding
facility, issued a news release which indicated that, as a result "of the
current unfavourable conditions in the Canadian asset-backed commercial
paper (ABCP) market, it (Coventree) has been unable to place new ABCP to
fund the repayment of previously issued ABCP maturing today. As a result
of this market disruption, it has extended the term of extendible
In apparent reaction to the Coventree announcement, trading activity in
Xceed's shares on the Toronto Stock Exchange increased sharply late
Monday afternoon, with a resultant 20.18% decline in Xceed's trading
price to close at $4.51.
Coventree is one of three sources that Xceed uses to fund its mortgage
portfolio. During the past few years, Xceed has set out to diversify its
mortgage funding programs to provide greater liquidity for its business.
In April 2006, it completed its first term financing transaction through
Xceed Mortgage Trust, which is not a Coventree-sponsored vehicle and
which has since provided approximately $1.1 billion of non-recourse term
mortgage funding to Xceed's mortgage portfolio. During the past six
years, Xceed used a warehouse line to provide shorter-term funding, which
was enhanced in November 2006 and replaced by a $350 million 364-day
committed warehouse facility arranged with Deutsche Bank AG that is
priced based on Bankers' Acceptance rates.
Xceed typically uses its funding programs to provide short-, medium- and
long-term financing for its portfolio of mortgages. Short-term funding is
provided by the warehouse facility; medium-term funding is provided by
the ABCP market; and longer-term funding is provided by the term market.
While Coventree currently serves as the securitization agent for Xceed's
medium-term ABCP facility, which holds approximately $1.3 billion of
Xceed's mortgages, these mortgages were sold to the facility on a non-
recourse basis. As a result of Coventree's extension of the term of
extendible ABCP, these mortgages are henceforth being funded for an
extended term of up to 364 days.
Given that a portion of Xceed's portfolio is currently funded by extended
term ABCP and wider market credit spreads prevail, these are expected to
have a negative impact on Xceed's profitability and cash flows. The
effect will depend on the size of the increase in market spreads and for
how long such conditions last. However, Xceed expects its warehouse
facility will adequately provide funding for new mortgage originations
for several months.
"In pursuing the continual enhancement and diversification of funding
sources, Xceed's management has been negotiating with several Canadian
and international banks over the course of the past few months. This is
management's top priority. While there are no assurances that new
facilities will be available during this time of market disruption,
management expects to be successful in arranging additional funding for
Xceed's business," said Ivan Wahl, Chairman and Chief Executive Officer.
"While the length of the period of market turbulence and widening credit
spreads is undetermined, it is important to note that the Canadian
housing market remains healthy. Canadian mortgage markets have performed
significantly better that their United States counterparts, with defaults
and losses that are a fraction of those occurring south of the border,"
The very significant differences between mortgage markets in the United
States and Canada are described in the presentation "U.S. - Canada
Mortgage Market Comparison" that is available on Xceed's website.
Xceed Mortgage expects to announce its financial results for the fiscal
third quarter ended July 31 on September 14, 2007.
Xceed is one of a new breed of alternative residential mortgage lenders
in Canada. Xceed helps Canadians fulfill their aspirations of home ownership.
Its borrowers range from those who have solid credit and income histories, but
have not managed to save a down payment, to those who have gone through
periods with limited and specific credit difficulties but have since recovered
and repaired their credit. A growing proportion of Xceed's applicants are
renters, self-employed entrepreneurs, and recent immigrants to Canada, who may
otherwise not conform to major banks' electronic credit-scoring criteria.
By meeting the needs of Canadians for alternative financing, Xceed
Mortgage Corporation has grown to become one of the largest non-traditional
residential mortgage financing companies in Canada, with mortgage and other
assets under administration of approximately $2.6 billion. Xceed operates in a
market that is estimated to have a potential size of approximately
$70 billion. 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),