Monday, August 13, 2007

Conduit / SIV Trouble In Canada "Coventree Fails to Sell Asset-Backed Commercial Paper"

Another day another bust. Stock is tumbling over 30 percent. This should come as no surprise. This was the reason the German IKB was getting into deep trouble. I´m pretty sure that we will hear similar news like this almost on a weekly basis. Still havn´t heard anything new from the Landesbank Sachsen with their 82 percent mortgage related multibillion $ conduit.

Ein neuer Tag und schon wieder neue Probleme. Die Aktie stürzt um 30% ab. Das ganze dürfte aber nicht wirklich überraschen. Der Grund ist derselbe der auch die IKB in Schwierigkeiten gebracht hat. Ich denke das ganze wird uns noch wochenlang verfolgen. Bin gespannt ob wir demnächst Neuigkeiten von dem Conduit der Landesbank Sachsen der ja zu 82% aus Hypothekenpapieren besteht, hören werden.

Once more a big hat tip to the reader who pointed me to the story

All tables taken from Coventree Annual Report 2006 (large PDF!)
"Coventree’s sponsored conduits are funded principally through the issuance of ABS, including ABCP both liquidity-backed commercial paper and extendible commercial paper (“ECP”) and, to a limited extent, through the issuance of term notes and floating-rate notes (“FRNs”).
The Company has been a leading innovator of new funding products. Coventree was one of the first issuers of ECP and ABS floating-rate notes in Canada. Coventree-sponsored conduits are the largest issuers of ECP in Canada, with approximately 42%10 market share. The following table provides the approximate breakdown of the types of notes issued each fiscal year by the various conduits sponsored by Coventree as of the fiscal year end"
"Currently, Coventree sponsors a number of multi-asset, multi-seller conduits. These rating agency-approved conduits have the ability to issue extendible commercial paper, which allows us to securitize a wide variety of assets without the need for bank liquidity support"

> Looks like this isn´t any longer the case......

> Sieht ganz so aus als wenn das nicht mehr ganz der Wahrheit entspricht.....

Aug. 13 (Bloomberg) -- Coventree Inc., the Canadian finance company that went public in November, failed to sell asset-backed commercial paper to replace maturing debt because of the credit crunch caused by U.S. subprime mortgage losses.
The shares tumbled 35 percent after the company extended maturities on C$250 million ($238 million) of commercial paper and sought emergency funding for another C$700 million of debt. Toronto-based Coventree's units have about C$16 billion of asset- backed commercial paper outstanding. ....
>The ABCP conduits that Coventree sponsors are multiasset. They have a variety of different underlying assets and asset classes that back the ABCP and term notes issued by them. The following table provides the approximate breakdown of the various asset classes funded at each fiscal year end in conduits sponsored by Coventree:
Coventree is among the first companies to delay payments on asset-backed commercial paper in the U.S. and Canada in the 12 years since the debt was created.
``There's so much CP out there, and if one part of the market locks up, it tends to be contagious,'' said Brian Yelvington, a strategist at CreditSights Inc. in New York.

Shares Tumble
In the U.S., asset-backed commercial paper comprises about $1.15 trillion of the $2.16 trillion in commercial paper outstanding. The debt is backed by mortgages, bonds, credit card and trade receivables as well as car loans.

> Charts etc. Commercial Paper Rates and Outstanding/ Federal Reserve

In the U.S., extendible notes constitute about $172.5 billion in debt outstanding, according to Moody's Investors Service. About $60 billion is backed by mortgages securities, according to New York-based Bears Stearns.

Shares of Coventree fell C$4.48 to C$8.50 after earlier being halted on the Toronto Stock Exchange. The firm's market capitalization tumbled to C$141.4 million from C$215.9 million.

> "Having motivated and aligned employees who are committed to a common purpose with shared values will be a key to our future success. In that light, we conducted our fourth annual mployee opinion survey"
> Time for a new survey... but they probably don´t need one in the next year

> Zeit für eine neue Umfrage......aber wahrscheinlich wird keine mehr benötigt....

Coventree's announcement heightened worries that rising defaults on subprime loans are infecting securities across the credit markets. DBRS, a Toronto-based ratings company, said today it received notice from ``a number of'' Canadian issuers that had sought backup financing.

``It's not just Coventree,'' said Huston Loke, group managing director of Global Structured Finance at DBRS. ``We're still in the process of going through notices. When it becomes more clear, we'll have more to say.''

Risk Rises
Contracts on the CDX North America Investment-Grade Index, a benchmark for the cost of protecting investment-grade bonds, rose 6.5 basis points to 76.5 basis points 64, according to broker Phoenix Partners Group in New York. An increase indicates worsening perceptions of credit quality.

Units of American Home Mortgage Investment Corp., the residential-mortgage lender that filed for bankruptcy, Luminent Mortgage Capital Inc. and Aladdin Capital Management LLC, last week exercised options allowing them to delay repaying the debt, according to Moody's Investors Service.

Germany's state-owned KfW Group and banking associations this month agreed to cover as much as 3.5 billion euros ($4.8 billion) of potential losses at IKB Deutsche Industriebank AG, after the bank's Rhineland Funding faced difficulty in rolling over commercial paper.

Thornburg, Aegis
Thornburg Mortgage stock plunged the most since October 1998 after the Bear Stearns report. The shares dropped 18 percent, taking the decline for the year to 43 percent.

``A change in funding requirements could force the company to post more collateral and/or sell assets and potentially pressure the dividend,'' Bear Stearns analysts including David Hochstim wrote in a note.

Aegis and 10 affiliates sought bankruptcy protection today. Aegis, 80 percent owned by an affiliate of Cerberus Capital Management LP, last week announced it was shutting down its lending business.

Comet, Planet
Coventree's debt was issued by Coventree-sponsored entities ( Conduits) including Apollo, Aurora, Comet, Gemini, Planet, Rocket, Slate, SIT III and SAT, the company said.

Coventree listed BNP Paribas, CIBC World Markets, HSBC Bank Canada, Deutsche Bank Securities, National Bank Financial, and Laurentian Bank of Canada as ``dealer partners'' on its Web site, saying they sold its commercial paper.

The company has other commercial paper maturing and may be forced to extend maturities on that debt too and draw more money from other sources, Coventree said.

``If a manager is extending due to the inability to issue new CP, there is little incentive for the traditionally low-risk tolerant CP purchasers to take risk on new paper from that issuer,'' Yelvington said. ``The risk-reward usually is not high enough.''
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Blogger jmf said...

Fast and furious....

Rams Says U.S. Credit Markets Threaten to Cut Profit

Aug. 14 (Bloomberg) -- Rams Home Loans Group Ltd., an Australian mortgage lender that sold stock last month, said the shakeout in global debt markets may cut earnings. Its shares slumped 23 percent, making it the nation's worst initial public offering this year.

The impact on the company's June profit forecast ``is likely to be material'' because of rising financing costs, Rams said today in a statement. The Sydney-based lender, which doesn't take deposits, gets almost half the funds for its mortgages by selling short-term debt in the U.S.

Rams, with A$14.2 billion ($11.9 billion) of loans, is the first Australian mortgage company to warn profit may be hurt by the deepening crisis in credit markets. Australian hedge funds Absolute Capital Group Ltd. and Basis Capital Fund Management Ltd. have already been caught in the rout and are trying to avoid selling assets at distressed prices.

``We estimate the current conditions could trigger a refinancing of Rams' extendible commercial paper structure to more expensive, longer-term funding,'' Alex Chau, a Sydney-based analyst at Credit Suisse, said in the report

11:46 PM  
Anonymous Anonymous said...

Yes, you can (try to) patent this stuff

Note “market disruption event”... has one occurred??... can trigger extension for extendables and or recourse to liquidity lines/providers.

1:22 AM  
Blogger jmf said...

Subprime Problems Spread Into Commercial Loans

1:49 AM  
Blogger jmf said...

Coventree Rises After Finding Buyers for C$600 Million of Debt

Coventree Inc. shares climbed as much as 27 percent after the Canadian financial-services company said it found buyers for C$600 million ($557 million) of asset-backed debt.

Coventree shares climbed 63 cents to C$3 in 9:34 a.m. trading on the Toronto Stock Exchange.

The Toronto-based company's stock had lost 82 percent over the past two days after seeking emergency funding amid a global credit crunch. Coventree said last night it extended maturities on C$60 million of debt and requested funding from lenders to refinance another C$60 million.

Coventree manages some of the 17 commercial paper funds that failed to roll over all their debt this week after the U.S. subprime credit crisis spread to Canada.

6:56 AM  

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