Home Capital buying time
Lender’s $2B credit line will help it secure new financing
Home Capital Group Inc. says an emergency credit line has bought time to secure new financing at better terms, even after the alternate lender a day earlier warned that a run on deposits cast its future as a going concern in doubt.
“The last few weeks have not been easy for any of us,” said interim chief executive Bonita J. Then, who assumed the role after the March 27 dismissal of former CEO Martin Reid, whose sudden termination came days before the Ontario Securities Commission (OSC) accused Home Capital of making misleading statements to investors about its subprime mortgage underwriting operations. Home Capital says the allegations are without merit.
“I believe in the fundamental business premise of Home Capital,” Then told analysts on a conference call Friday. “This company matters to a great number of people.”
Home Capital late Thursday said it earned $58 million or 90 cents a share in its first quarter ended March 31, just below the $64.2 million or 92 cents in the 2016 period. The com- pany warned on a conference call with analysts, however, that charges will reduce operating strength going forward, while costs generated by a $2-billion credit line will also hurt future results. Depositors have withdrawn nearly 94 per cent of funds from Home Capital’s high-interest savings accounts since the company terminated Reid, though data it released Friday showed the rate of withdrawals has slowed. Events since the dismissal have also halved the value of the company’s stock.
Home Capital said its high-interest savings deposits were expected to have fallen to about $125 million following Thursday’s settlements