Struggling mortgage lender Home Capital says it’s in no rush to sell
TORONTO — Cash-strapped alternative lender Home Capital Group says it has a number of interested buyers and investors, but selling itself or its assets is not the company’s priority.
“We do have a number of people who are interested in giving us financial support and/or making a strategic investment or acquisition in the company,” board director Alan Hibben said during a conference call to discuss Home Capital Group’s first-quarter results. “I don’t want to say though that we’re rushing in order to take that, because I think some of the steps that we’re taking are going to provide a bit of a floor.”
Shares of Home Capital slumped 15.45 per cent to close at $9.14 in Friday trading on the Toronto Stock Exchange.
The prospects of a takeover or asset sales are being closely watched by financial markets after Home Capital was hit last month by allegations from staff at Ontario’s securities watchdog that the lender misled investors in its handling of a scandal involving falsified loan applications. The company has said the allegations are without merit.
The allegations spurred customers to pull deposits, which Home Capital uses to fund its mortgage lending. On Thursday, Home Capital warned material uncertainty exists regarding its future funding capabilities as a result of reputational concerns “that may cast significant doubt upon the company’s ability to continue as a going concern.”
Earlier this week, Home Capital announced that it plans to sell up to $1.5 billion of its mortgage assets to an independent third party.
Home Capital did not identify the third party buyer during the call, which saw directors and executives peppered with questions from analysts. But the company did say the buyer was someone they had done business with in the past.
Asked if Home Capital is planning to sell more of its mortgage assets, Hibben said it’s looking to other solutions first. “You don’t shrink your way to greatness,” said Hibben, a former RBC executive who joined Home Capital’s board earlier this month as part of a push to renew governance and restore investor confidence.