Home Capital talking to banks, Hibben says

Home Capital Group has reached out to Canada’s big banks and other entities to refinance a costly $2 billion loan from the Healthcare of Ontario Pension Plan, said Alan Hibben, a former investment banker who replaced founder Gerald Soloway on the board of the embattled Canadian mortgage lender.

“I’m talking to all sorts of entities — banks and others on this,” said Hibben, who was named to Home Capital’s board on May 5 to help rebuild confidence at the Toronto-based mortgage lender. “The replacement on the HOOPP deal is really a debt-like financing, so we’re looking at people who can actually provide deposit note-type support to this thing.”

Home Capital’s woes intensified last month, when Ontario’s securities regulator accused the company of misleading investors on the firm’s probe into falsified mortgage applications some two years earlier.

Home Capital has since faced a run on deposits and plunging shares, forcing it to take a loan with terms that include an effective rate of 22.5 per cent on the first $1 billion and conditions that prevent the company from taking on more debt or pursuing asset sales, mergers or a windup without permission from HOOPP.

“We’ve bought ourselves enough time to run a couple of months, but that’s obviously not our time frame on this,” Hibben said in an interview Monday. “I am hoping that I can have some degree of stability within the deposit base, because it’s just easier to talk to people about a deal with better term and better terms, if we have some element of stability underlying the company.”

Home Capital’s high interest savings deposit balances stood at about $125 million as of Friday, roughly the same as the day earlier, the firm said in a statement. Available liquidity and credit capacity totalled about $1.51 billion, including an undrawn $600 million under the company’s $2 billion credit facility.

Mortgage financing firm MCAP Corp. said last week it reached a deal to service $1.5 billion of Home Capital’s mortgages and renewals. Hibben said there’s the potential to bring in other partners or upsize the deal — without naming MCAP as the third-party — though he said private equity players are unlikely.

“There are other players in the marketplace that we are talking to about that,” he said. “We’ve had some very early indications of interest in upsizing that, but nothing has been done.”

Hibben is a retired investment banker who once oversaw mergers and acquisitions.