Home Capital eyes disposals to address funding issues

Sat May 13, 2017 11:40am EDT
 
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(This version of the story corrects paragraph 10 to show quote was by Interim CFO Bob Blowes, not Robert Morton as previously stated)

By Matt Scuffham

TORONTO (Reuters) - Home Capital Group Inc (HCG.TO: Quote) confirmed on Friday it is considering asset disposals to enable it to refinance more quickly and pay off an emergency loan provided by the Healthcare of Ontario Pension Plan.

Shares in Canada's biggest non-bank lender fell by as much as 20 percent in early trading on Friday before paring losses to trade down 11.6 percent at 1230 EST.

After the stock market closed on Thursday, Home Capital issued first-quarter results in which it said uncertainty around future funding had cast doubt about whether it could continue as a going concern.

Depositors have withdrawn nearly 94 percent of funds from Home Capital's high-interest savings accounts since March 27, when the company terminated the employment of former Chief Executive Martin Reid.

The withdrawals accelerated after April 19, when Canada's biggest securities regulator, the Ontario Securities Commission, accused Home Capital of making misleading statements to investors about its mortgage underwriting business.

Home Capital relies on deposits from savers to fund its lending to borrowers, such as self-employed workers or newcomers to Canada, who may not meet the strict criteria of the country's biggest banks.

Reuters reported on Thursday that Home Capital was in talks to divest about C$2 billion in assets to help pay down a high-interest loan, according to people familiar with the situation.   Continued...

 
FILE PHOTO: The entry to the Home Capital Group's headquarters are seen in an office tower in the financial district of Toronto, Ontario, Canada, on April 26, 2017.  REUTERS/Chris Helgren/File Photo