The closing of the asset-backed commercial paper restructuring plan has a positive impact of $4.77 million in cash flow and pre-tax income for Xceed Mortgage Corporation, the company has announced.

Further, with the restructuring of the ABCP, Xceed expects an improvement in the cost of funds for about $773 million of the roughly $2.1 billion of mortgages that the corporation has under administration.

When the market for third-party ABCP collapsed in August 2007, the securitization agent was required to extend the term and increase the cost of funds of the extendible ABCP assets. Accordingly, the deferred net mortgage receivable for the fiscal year ended October 31, 2007 was reduced to reflect the valuation at that time.

Xceed now expects to increase the deferred net mortgage interest receivable by between $4 million and $5 million on a pre-tax basis, or between $2.7 million and $3.3 million on an after-tax basis. These changes will be reflected in the financial results of the corporation’s fiscal first quarter ending Jan. 31.

This will also result in an improvement in Xceed’s cash flow of approximately $200,000 to $250,000 per month starting February of 2009 for an estimated period of 20 months.

“The resolution of the ABCP restructuring certainly is a welcome and positive development for Xceed as it is for investors and for capital markets,” said Ivan Wahl, chairman and CEO.

“At the same time, this resolution unfortunately does not change the fact that it still is not possible for Xceed or others to securitize uninsured mortgages, as we did in the past. We hope that new financing vehicles eventually will be created that will enable us to return to our past focus of offering non-traditional mortgages to those Canadians who should be able to access such funding to buy homes.”

In the meantime, Wahl said the company would continue to originate and renew only those mortgages that are insurable and qualify for sale to the Canada Mortgage Bond Program.

Xceed’s profitability is directly affected by the spread margins associated with its mortgage product offerings. The cost to fund the portfolio is one element in the valuation of the deferred net mortgage interest receivable on its balance sheet. Continued market volatility and unprecedented developments in the capital markets, which contributed to dramatic declines in interest rates during the fiscal first quarter of 2009, will continue to impact the valuation of Xceed’s deferred net mortgage interest receivable, the company said.