Canaccord takes hit for ABCP
Canaccord three-month trading on the TSX
Canaccord Capital Inc. fell into the red for the quarter and year ended March 31 because of its decision to buy out clients who had purchased asset-backed commercial paper (ABCP) from the broker.
The company said Thursday that the loss for the quarter ended March 31 was $35.2 million (80 cents a share), largely because of its "relief program" for ABCP buyers, restructuring charges and writedowns of ABCP it held itself.
Without those charges, Canaccord would have made a profit of $7.2 million (15 cents a share, diluted). In the corresponding 2007 quarter, it made $26 million (54 cents). Revenue was $143.4 million, compared with $216.4 million.
"The fourth quarter of Canaccord's fiscal year was a very challenging one, as it was for the entire industry," Paul Reynolds, president and CEO, said in a news release. "We were disappointed by our results."
Buyback of client's paperCanaccord announced April 9 that it would buy back at par ABCP investments from all of its clients who held $1 million or less of the paper.
About 1,800 retail investors — most at Canaccord — were caught last August by the sudden collapse of the market for asset-backed commercial paper, a short-term debt product that bundled a variety of loans together, including U.S. subprime mortgages, and was then sold to investors small and large.
When the market collapsed, ABCP trading was frozen, leaving investors holding a product they couldn't sell. However, a relief plan covering the whole ABCP market — including Canaccord's offer to its retail investors — was approved by an Ontario judge on June 6.
Canaccord took a $4.2 million charge for ABCP it held itself.
Profit for the year ended March 31 was $31.3 million (64 cents a share, diluted), compared with $93.5 million ($1.94) a year earlier. Revenue was $731.5 million, compared with $756.9 million.
ABCP charges totalled nearly $70 million, before tax.
Canaccord shares closed up five cents at $8.93 in TSX trading. They are changing hands near the bottom of the 52-week range of $8.60 to $22.49.
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