SAN DIMAS, Calif. – WesCorp FCU reported yesterday a new methodology for calculating the values of its assets helped trim unrealized losses on its investment portfolio slightly at the end of October to $1.7 billion, from $1.8 billion the month before, but the western corporate also warned of potential losses on troubled collateralized debt obligations, known as CDOs.
The $27 billion corporate credit union told members the 10 CDOs it holds amounting to $550 million continue to pay principle and interest in full, but the credit support, some of the underlying assets, has eroded, meaning WesCorp may have to realize some of the unrealized losses it has recorded on the bonds.
WesCorp told members that despite the unrealized losses on its investments it has the ability and the intent to hold those securities to maturity, so it will not have to report the securities to be other-than-temporarily impaired, and thus, have to take a charge for them.
During September, WesCorp hired an outside consulting firm, Protiviti, to perform a review of the methodology and process used to determine third-party valuations for its portfolio which resulted in the modest improvement in unrealized losses.
Of the $1.7 billion of unrealized losses WesCorp held at the end of October, $653 million of it was in its held-to-maturity securities. Those securities represents WesCorp’s entire holdings backed by Alt-A collateral and the majority of WesCorp’s CDOs.
