U.S. News

Coventree Stock Plunges as Firm Warns Wind-Downs Possible


Stock in structured-finance firm Coventree lost more than half its value Tuesday after it said various Coventree-sponsored trusts could not fund maturities of Canadian asset-backed commercial paper due to what it called a "market disruption."

In a third-quarter results statement Tuesday, the company, which packages and resells various types of short-term debt, also said there can be no assurance that its conduits will be able to keep issuing asset-backed notes, even if the market disruption is addressed.

Coventree had asked for C$700 million ($660 million) in back-up funding, and said Tuesday that some lenders did not agree that they had to provide funding.

"Certain liquidity providers have advanced funding, some have disagreed that they have an obligation to fund, some are in discussions with the company and some have not responded," the company said.

If Coventree-sponsored conduits cannot issue additional commercial paper, "such conduits will likely begin an orderly wind-down process," it said.

Shares of Coventree were down 58% at C$3.55 on the Toronto Stock Exchange Tuesday afternoon after falling 34% Monday.

Coventree said holders of commercial paper issued by trusts that incur losses may go after the company for damages.

"While Coventree believes that it will not have liability in respect of losses suffered by ABCP holders, such holders may seek damages from the company," it said.

A company spokesman was not available to provide further details.

Coventree said Monday that it was not able to place new asset-backed commercial paper after U.S. subprime mortgage problems created "unfavorable conditions" in the Canadian market.

It extended the term of some asset-backed notes, and said Tuesday that on behalf of its conduits, it will have to extend additional notes and attempt to make further draws on its liquidity facilities if the market disruption continues.

The company sponsors and administers about C$16 billion in various asset-backed commercial paper vehicles. It is based in Toronto with an office in Denver, Colo.

Coventree went public in November 2006 at a price of C$10.75 a share. At the time of the offering, Quebec pension manager Caisse de depot et placement du Quebec sold more than 3 million shares.