Travel company Transat A.T. Inc. said Friday that an $11.2-million writedown on asset-backed commercial paper pulled its earnings lower in the fourth quarter.
| What is ABCP? |
|---|
|
ABCP — asset-backed commercial paper — is short-term corporate debt that is made up of a bundle of loans like credit card receivables and car loans. This debt is then resold to other investors, taking the original loans off the books of the company that first issued them. That can lead to lower lending standards because the originator of the loans doesn't have to worry about collecting. ABCP tends to yield more than Treasury bills, making it a popular place for money market funds and pension funds to park money. In Canada, about two-thirds of the $120-billion ABCP market is sponsored by the big banks. The rest is known as third-party, or non-bank, ABCP. In 2007, holders of some non-bank Canadian ABCP ran into trouble refinancing the debt when the credit crunch made investors shy away from any investment perceived to be risky. |
The Montreal-based company said it made $7.7 million in the quarter, or 23 cents a share. The company said that result also included a $3.9-million goodwill writedown on its investment in Travel Superstore Inc. and a $13.6-million gain related to fuel contracts.
Factoring out the one-time items, the company said it would have made a profit of $10.4 million, or 31 cents a share.
In the fourth quarter of last year, Transat made $13.6 million, or $0.39 per share.
Transat said it saw "tremendous price pressure" on air routes between Canada and Britain due to competitors adding capacity and extra passenger taxes on U.K. departures.
The company's fourth quarter revenues grew to $680.4 million, up almost 10 per cent from the $619.5 million reported a year ago. The increase was mainly related to growth from Canadian tour operators, along with growth in France at Look Voyages and the acquisition of Amplitude Internationale in July 2007.
Transat said back on Aug. 22 that it had about $154.5 million of its available cash invested in non-bank asset-backed commercial paper, with 10 different ABCP trusts. The fourth-quarter writedown is the company's estimated reduction in the value of those investments.
Shares of Transat A.T. finished the day down $3.57 at $36.07 on the TSX.
Transat A.T. is the owner of the Air Transat airline.
More Money Headlines »
- Chrysler takes over number two spot in Canadian car market
- Chrysler Canada has overtaken Ford as the second-biggest vehicle seller in the country, bumping Ford out of the position it has held for decades.
- Toyota outdrives Ford in 2007 in U.S. market
- Toyota Motor Corp. moved into second spot in the U.S. market last year as it broke Ford's grip behind General Motors.
- Gold reaches another new high
- The price of gold hit new record levels on Thursday as it reached an intraday trading high of $871.20 US an ounce on the New York Mercantile Exchange.
- Ford picks India's Tata as top bidder for Jaguar, Land Rover
- Ford Motor Co. picked India's Tata Motors Ltd. as the top bidder for its Jaguar and Land Rover units, the Detroit automaker said Thursday.
- Florida cold snap didn't harm orange crops, say growers
- A blast of unusually cold weather doesn't appear to have damaged Florida's multibillion-dollar citrus crop, an industry spokesperson said Thursday.
Blog Watch
Most Blogged about CBC.ca Articles
Note: CBC does not endorse and is not responsible for the content of external sites - link will open in new window
