Home Cap­i­tal taps $1 bil­lion from credit line

The Hamilton Spectator - - LOCAL -

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.

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