SAN DIMAS, Calif. – Corporate losses continue to grow at an alarming speed, as WesCorp FCU reported on Christmas eve that unrealized losses on its books surged from a reported $1.7 billion at the end of October to $2.8 billion at November 30.
The corporate’s losses accelerated after the Treasury Department in early November abandoned its plans to buy illiquid assets from credit unions and banks, pushing losses at U.S. Central FCU to a staggering $9.6 billion and at Members United Corporate FCU to another $380 million, or $1.9 billion.
WesCorp’s Christmas-eve report came a day after Moody’s Investors Service downgraded ratings for both WesCorp and U.S. Central to below investment grade because of the growing losses for each.
The nation’s 28 corporate credit unions are now sitting on losses on their investments of as much as $18 billion, while hoping the worst bear market in decades turns around and enables them to salvage some of these underwater investments.
WesCorp’s message to its members underscores this hope. "We believe the depressed fair values of these investments are largely attributable to the dislocation in the securities market caused by the current illiquidity and credit conditions, and do not accurately reflect the underlying credit quality and likely performance of our holdings," said the giant corporate, which has seen its assets decline to $22.5 billion, from $31.3 billion a year ago.
WesCorp said it holds a total of $544 million worth of collateralize debt obligations, known as CDOs, which it has written down by $262 million. It has also booked $521 million of unrealized losses on so-called Alt-A mortgage backed securities; and losses of $530 million on subprime asset backed securities. WesCorp said securities with a fair value of $17 billion are being carried at $14.2 billion, for total unrealized losses of $2.8 billion.
For the month of November, WesCorp’s base net economic value, a key indicator of solvency used by NCUA, decline to negative $2.2 billion.
Earlier in the week, U.S. Central, the central bank for credit unions, reported its unrealized losses surged in November by $1.3 billion to $9.6 billion; Members United reported its losses expanded by 24% to $1.9 billion; and Southeast Corporate FCU reported an additional 28% losses of $175 million. Two other corporates with large losses, Southwest Corporate, which reported $1.2 billion in losses for October, and Corporate One FCU, which had $300 million in losses, are expected to report additional losses in the coming days.
