Home Capital homes in on new CEO as it works to restore market confidence
Company aggressively advertising high interest rates on its savings products
Home Capital Group says it’s narrowed down potential CEO candidates to a “short short list” and is weeks away from making an announcement, as it strives to reverse its fortunes after suffering a run on deposits earlier this year.
Company chair Brenda Eprile said the alternative mortgage lender is also close to identifying a new chief financial officer but will await input from the person who takes over as chief executive.
“We want to make sure that our new CEO is involved in that process,” Eprile told reporters following the company’s annual shareholder meeting in Toronto Thursday. “That’s a partnership that’s critical.”
The management shuffle is part of the company’s efforts to restore market confidence following allegations from the Ontario Securities Commission that it misled investors in its handling of a scandal surrounding f alsified loan applications.
The securities watchdog’s allegations caused customers to pull out deposits from the lender’s GICs and savings account en masse, forcing it to secure a costly line of credit from the Healthcare of Ontario Pension Plan to finance its operations.
The company has since settled the OSC case, as well as a class-action lawsuit filed by investors, and has been aggressively advertising high interest rates on its savings products in order to attract additional funds.
While Home Capital says there are encouraging signs of a turnaround afoot, board member Alan Hibben said during the annual meeting Thursday that it’s “too early to declare victory.”
The lender has seen inflows of deposits since it got a vote of confidence from famed billionaire Warren Buffett, whose Berkshire Hathaway will invest up to $400 million in the company.
The Toronto Stock Exchange has given conditional approval, as expected, for Berkshire’s initial investment of $153.2 million to acquire 16 million Home Capital shares, or about 20 per cent of the company’s total equity.
A second round of investment from Berkshire would buy a further $247.7 million worth of Home Capital stock and raise its ownership stake to 38.4 per cent. That investment requires shareholder approval at a special meeting later this year.
Home Capital also provided an update Thursday on how much its near collapse back in May has cost the lender.
The company says its expenses soared $175 million above normal during the second quarter as it fought to survive a cash shortage.
The estimate includes a previously reported $100 million in fees and transaction costs related to the $2 billion of emergency funding that Home Capital borrowed from the Healthcare of Ontario Pension Plan.
Home Capital says it also had a loss on the sale of some of its asset portfolio and higher than normal professional, legal and interest costs during the quarter.
The company shares were down 16 cents or 0.93 per cent to $17.03 in trading on the Toronto Stock Exchange Thursday afternoon.
The shares hit a low of $5.06 in April.