Home Capital taps $1 billion from credit line

Home Capital said it expected to receive an initial $1 billion on Monday from the $2 billion credit line it was provided last week as more customers pulled their savings out of the struggling mortgage lender.

Shares of the Toronto-based lender tumbled last week following allegations from Ontario’s securities watchdog that it misled investors, accusations it says are without merit and has promised to defend itself against. The news spurred many savers to withdraw their deposits, which Home Capital uses to fund its lending.

Home Capital said it expected the total amount in its high-interest savings accounts will dwindle to about $391 million by the end of Monday, a decline of about $1 billion from a week ago. It also said the balance of total guaranteed investment certificates has fallen to $12.86 billion as of Friday, down from $13.01 billion as of last Monday.

The Healthcare of Ontario Pension Plan gave a $2 billion credit line last week to Home Capital.

The Ontario Securities Commission has scheduled a hearing into the allegations against Home Capital on Thursday.

Meanwhile, Equitable Group’s shares soared on Monday after the alternative mortgage lender said it reached a deal to borrow up to $2 billion, if needed, from a syndicate of Canadian banks. Its shares rose 30 per cent or $10.86 to close at $47.35 on the Toronto Stock Exchange. Equitable’s stock price had been under pressure after clients of Home Capital began pulling their money out of that subprime lender.

Like Home Capital, Equitable Group offers mortgages to people who may not qualify for loans from the major banks.

In a news release issued Monday, Equitable Group said it also saw a decrease in its deposit balances last week, with clients pulling out an average of $75 million daily between Wednesday and Friday. In total, Equitable lost 2.4 per cent of its deposit base during those three days.

But Equitable Group has secured a letter of commitment for a credit facility from a syndicate of banks including TD Bank, CIBC and National Bank.