Quest Capital Corp. ("Quest" or the "Company") (TSX: QC)(NYSE Amex:
QCC), a Canadian Mortgage Investment Corporation ("MIC"), today
reported its financial results for the three and six months ended
June 30, 2009, including solid progress in monetizing its loan
portfolio.
"We're pleased with the progress made to date this year in the
context of challenging credit and real estate markets," said A.
Murray Sinclair, Quest Chairman. "As a result of adjusting our
focus, we were able to monetize $25 million in loans during the
quarter, eliminate bank debt, improve liquidity and strengthen our
asset management capabilities. While we still have much work to do,
and realistically face the potential for additional loan losses, we
begin the third quarter with a lower cost base and confidence in
our ability to realize value from our portfolio, protect
shareholders' equity and manage through this stage of the economic
cycle."
SECOND QUARTER RESULTS
- $25 million of loans were monetized. This represents 5 loans
repaid in full and 4 partial repayments, including the sale of
foreclosed property valued at $4.4 million, reflecting the
successful application of the Company's monetization strategy, and
management's self-imposed restriction on new loans
- Debt-facility-and-preferred-share-liability to equity ratio
was 0.13 to 1 at June 30, 2009 a significant improvement from the
ratio of 0.22 to 1 a year earlier
- Net interest income was $3.9 million compared to $10.8 million
a year ago reflecting a reduction in performing loans upon which
interest is recognized
- For the first time in 22 quarters, the Company was
unprofitable due to a specific loan loss provision of $5.9 million
(4 cents per share) compared to $nil in 2008 as well as $1.5
million in reorganization costs ($nil in 2008). Net loss was $4.3
million (3 cents per share) compared to net income of $7.5 million
(5 cents per share) a year earlier.
SIX MONTH RESULTS
- Net interest income was $10.5 million compared to $21.5
million a year ago
- Net loss was $2.9 million (loss of 2 cents per share)
including a specific loan loss provision of $8.5 million (6 cents
per share) and reorganization costs of $1.5 million (1 cent per
share) compared to net income of $14.6 million (10 cents per
diluted share) a year ago
- Shareholders' equity at June 30, 2009 was $291 million,
unchanged since year end 2008
- Book value per share at June 30, 2009 was $1.94 compared to
$1.98 at December 31, 2008.
CREDIT QUALITY
As anticipated due to weak economic and credit market
fundamentals during the first six months of 2009, the Company had
impaired loans of $162 million to 17 borrowers compared to $114
million (15 borrowers) at March 31, 2009 and $12 million at June 30
2008. Remedial action has been taken on each impaired loan. On 12
of these loans totaling $95 million, specific reserves in the
amount of $20 million have been provided. This represents an
increase in reserves of approximately $5.8 million since March 31,
2009 and primarily relates to specific reserves to four borrowers,
offset by the sale of foreclosed property. Management has not
provided for the remaining loans because the estimated net
realizable value of their collateral is in excess of the carrying
value.
DIVIDEND POLICY AND TAX LOSS CARRY FORWARDS
At June 30, 2009, there were $13.5 million of tax losses carried
forward which may be utilized further in 2009 and future years to
offset taxable income. Quest did not have taxable income in the
second quarter of 2009 nor was the Company able to utilize its tax
losses carried forward. Accordingly, the Company did not declare a
quarterly common share dividend on June 30, 2009. Quest will not be
paying a dividend on its common shares until it has utilized all of
its tax losses and at this time, under the current economic
circumstances, Quest cannot reasonably determine the precise
timing, in the short term, of the utilization of its tax loss carry
forwards.
OUTLOOK
"Canadian credit and real estate markets are showing modest
improvements with forecasters suggesting stronger economic growth
in 2010," said Brian Bayley, Quest President and CEO. "However,
many of our borrowers remain challenged in finding take-out
financing and as a result, risk of loan impairments remains above
average. For that reason, Quest will continue to concentrate on
curing impaired loans, collecting outstanding receivables, reducing
preferred share liability and managing costs. We expect to make
significant progress in these regards especially as we head towards
the end of the year. We're confident that this is the right formula
for preserving capital and realizing shareholder value."
Jim Grosdanis, CFO added "Quest continues to monetize its loan
portfolio and subsequent to June 30, 2009, Quest collected a
further $7 million in this regard and the Company is also actively
negotiating offers on several of its loans. With our on going loan
remediation progress, Quest intends to pay future declared
dividends on its preferred shares in cash."
CONFERENCE CALL
A conference call will be hosted by A. Murray Sinclair,
Chairman, and Jim Grosdanis, Chief Financial Officer. It will begin
at 11:00 am Eastern Daylight Savings Time on August 10, 2009 and
can be accessed by dialing (416) 644-3422. The call will be
recorded and a replay made available for one week ending Monday,
August 17, 2009 at midnight. The replay can be accessed about one
hour after the call by dialing (416) 640-1917 and entering passcode
21311672 followed by the number sign.
ABOUT QUEST
Quest's expertise is in providing financing for the real estate
sector with an emphasis on residentially-oriented mortgages.
For more information about Quest, please visit our website
(www.questcapcorp.com) or SEDAR (www.sedar.com).
Forward Looking Statements
This press release may include certain statements that
constitute "forward-looking statements", and "forward-looking
information" within the meaning of applicable securities laws
("forward-looking statements" and "forward-looking information" are
collectively referred to as "forward-looking statements", unless
otherwise stated). Such forward-looking statements involve known
and unknown risks and uncertainties that may cause our actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. Forward-looking
statements may relate to the Company's future outlook and
anticipated events or results and may include statements regarding
the Company's future financial position, business strategy,
budgets, litigation, projected costs, financial results, taxes,
plans and objectives. We have based these forward-looking
statements largely on our current expectations and projections
about future events and financial trends affecting the financial
condition of our business.
These forward-looking statements were derived utilizing numerous
assumptions regarding expected growth, results of operations,
performance and business prospects and opportunities that could
cause our actual results to differ materially from those in the
forward-looking statements. While the Company considers these
assumptions to be reasonable, based on information currently
available, they may prove to be incorrect. Forward-looking
statements should not be read as a guarantee of future performance
or results. Forward-looking statements are based on information
available at the time those statements are made and/or management's
good faith belief as of that time with respect to future events,
and are subject to risks and uncertainties that could cause actual
performance or results to differ materially from those expressed in
or suggested by the forward-looking statements. To the extent any
forward-looking statements constitute future-oriented financial
information or financial outlooks, as those terms are defined under
applicable Canadian securities laws, such statements are being
provided to describe the current potential of the Company and
readers are cautioned that these statements may not be appropriate
for any other purpose, including investment decisions.
Forward-looking statements speak only as of the date those
statements are made. Except as required by applicable law, we
assume no obligation to update or to publicly announce the results
of any change to any forward-looking statement contained or
incorporated by reference herein to reflect actual results, future
events or developments, changes in assumptions or changes in other
factors affecting the forward-looking statements. If we update any
one or more forward-looking statements, no inference should be
drawn that we will make additional updates with respect to those or
other forward-looking statements. You should not place undue
importance on forward-looking statements and should not rely upon
these statements as of any other date. All forward-looking
statements contained in this press release are expressly qualified
in their entirety by this cautionary notice.
Contacts: Quest Capital Corporation A. Murray Sinclair Chairman
(604) 687-8378 or (Toll Free): (800) 318-3094 Quest Capital
Corporation Jim Grosdanis Chief Financial Officer (604) 687-8378 or
(Toll Free): (800) 318-3094 (604) 682-3941 (FAX)
www.questcapcorp.com
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