Home Capital inks $1.2 billion asset deal

Home Capital Group is selling $1.2 billion in mortgage assets to real estate-focused private equity firm KingSett Capital as it looks to stabilize its position following a flood of customer withdrawals from savings accounts.

The deal will allow Home Capital to reduce its debt, after taking on an emergency $2-billion line of credit with onerous terms from the Healthcare of Ontario Pension Plan.

Home Capital says KingSett will buy the portfolio for 99.61 per cent of its outstanding principal value, less a share of future credit losses.

“This transaction will help the company further stabilize its liquidity position and highlights the flexibility and options created by the quality of our assets,” Bonita Then, Home Capital’s interim president and CEO, said in a statement.

Home Capital has been in a cash crunch since April when customers en masse started withdrawing their savings following allegations by the Ontario Securities Commission.

The securities watchdog had alleged the company misled investors in its disclosures surrounding a scandal involving falsified loan applications.

Last week, Home Capital resolved some of its troubles as it agreed to settle both the OSC matter and a class-action lawsuit filed by investors.