Coventree closing shop

Coventree has had its fair share of troubles lately, but that soon may come to an end, as the financial services firm is seeking what it calls an “orderly windup of its operations.”

Over the summer the company was hit hard by losses due to problems in the asset-backed commercial paper market, from which the firm has not been able to recover.

Coventree said Wednesday that its total revenues were down nearly 50% in Q1, from $21.8 million in 2006 to $11 million at the end of last year. Operating expenses also decreased by $5.6 million in Q1. In a release, the company said, “As a result of recent reductions in interest rates, the company’s revenues may no longer cover its expenses.”

The financial institution’s ABCP issues forced it to establish a special committee to determine the viability of the company’s business units. The committee found that both the capital markets unit and the administration business unit are “no longer viable,” while “no further investments will be made under the investments business unit.”

The special committee also said that it won’t “actively pursue any strategic options for the company that would result in it having ongoing operations.”

What the committee does recommend is that Coventree distribute any remaining funds to shareholders, setting aside some money to cover future costs and liabilities.

Not surprisingly, Coventree expects its revenue to be “significantly reduced” in the coming quarters, prompting the company to say that it can’t guarantee that there will be enough cash to cover the costs of the Pan-Canadian Investors Committee’s ABCP restructuring efforts.

Coventree executives declined comment for this story.

Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com