Published: Tue, May 09, 2017
Money | By Armando Alvarado

Home Capital says unnamed party plans to buy $1.10 billion in mortgages

Home Capital says unnamed party plans to buy $1.10 billion in mortgages

May 8 Canada's Home Capital Group Inc estimated on Monday that the balance in its high-interest savings accounts (HISA) halved in the past week and said it had suspended its dividend and tapped its C$2 billion ($1.5 billion) credit line for the second time. The stock has plunged about 68 since April 19, when the Ontario Securities Commission made public its allegation that the company misled investors.

Dylan Steuart, an analyst at Industrial Alliance Securities, said Home Capital's liquidity remains the main concern at the company.

Equitable shares were up 0.2 percent, while bank shares were broadly higher.

Kevin Smith has resigned as chair of troubled alternative mortgage lender Home Capital.

"The company seems to be mortally wounded". But as the crisis of confidence gripped the company, investors pulled out deposits, forcing Canada's biggest non-bank lender to seek an expensive emergency funding.

In addition, the terms of the new funding arrangement as well as the Company's previously announced $2-billion credit line will lead to a greater focus in the near term on originating mortgages to sell, rather than holding them on balance sheet and funding through deposits, as Home has traditionally done.

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The flurry of moves is just the latest chapter in a saga that has seen Home Capital's stock price fall almost 80 per cent over the course of the last six weeks.

"Claude, Paul and Sharon bring a tremendous amount of experience and skill that will be invaluable in helping the company deal with its operational challenges, and in ensuring that we move ahead to rebuild confidence in Home under the oversight of a very strong and trusted board of directors", Eprile said in a statement.

"They've named some pretty respectable board members. Until you see things stabilize, it's still an unknown", Cockfield added. Lamoureux is the former head of the Ontario Teachers' Pension Plan, Sallows is a former director at Ontario Teachers and sits on the board of RioCan Real Estate Investment Trust, a Canadian mall developer, while Haggis is the former head of the Ontario Municipal Employees Retirement System.

Sallows is now a trustee of Riocan Real Estate Investment Trust and Chartwell Retirement Residences.

The risk from Home Capital doesn't stem from the company's size or linkages - it holds only about 1 per cent of Canadian mortgages and these are on its own books, which limits spillovers. The balance deposited with GICs offered by its subsidiaries stood at $12.64 billion as of Friday, down $220 million since April 28.

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