TORONTO, May 9, 2017 /CNW/ - Home Capital Group Inc. ("The
Company" TSX: HCG) today announced that its subsidiary, Home Trust,
has entered into an arrangement with an independent third party
(the "Third Party") that wishes to purchase funded mortgages or
accept mortgage commitments and renewals up to a total of
$1.5 billion.
The Third Party has indicated its non-binding intention to
- Purchase as much as $1 billion in
qualifying uninsured mortgages, with an immediate interest in
purchasing or accepting commitments and/or renewals for up to half
of that amount, or $500 million;
and
- Purchase or accept commitments for up to $500 million in insured mortgages, subject to
appropriate documentation.
The Third Party has also indicated an interest in further
expansion of this arrangement at a later date.
"This is another step forward in the company's efforts to
restore confidence in our operations. It follows the recent
addition of four outstanding new Board members with corporate
governance and banking experience," Home Capital Board Chair
Brenda Eprile said. "The fundamental
premise of Home Capital is to assist home buyers, many of whom are
new Canadians, to obtain mortgage financing and achieve their dream
of home ownership."
"This purchase arrangement is designed to give us the ability to
continue to serve as many customers as possible in the mortgage
broker channel, and we are optimistic that there can be
opportunities for future growth," said Bonita Then, interim Chief Executive Officer of
Home Capital. "Meanwhile, we continue to work very hard to develop
additional sources of funding, while carefully managing our
liquidity."
"Notwithstanding this arrangement, we are tightening our lending
criteria and reducing some of our broker incentive programs and
expect that will result in a decline in our originations and
renewals," said Ms. Then. "We will continue to evaluate
opportunities that could enable us to return to more normal levels
of activity in our traditional on-balance sheet business."
The Company will continue to offer mortgages in most of its
existing product categories, however at reduced volumes.
In addition, the terms of the new funding arrangement as well as
the Company's previously announced $2-billion credit line will lead to a greater
focus in the near term on originating mortgages to sell, rather
than holding them on balance sheet and funding through deposits, as
Home has traditionally done. The Company anticipates that this will
result in lower overall mortgage balances, increased costs and
reduced levels of profitability in the near term. The
existing mortgage portfolio continues to perform well.
The Company and its advisers continue to work toward seeking
lower cost sustainable funding solutions and to evaluate strategic
alternatives to solidify and strengthen its successful mortgage
origination platform.
The Company also announced its intention to pay back 100% or
$325 million of the outstanding
aggregate principal amount of the Company's 2.35% Notes at the
scheduled maturity date,
May 24, 2017.
As previously announced, Home Trust has drawn $1.4 billion from its $2
billion credit line, under a commitment originally provided
on April 27, 2017. The credit line is
led by the Healthcare of Ontario Pension Plan (HOOPP) and was
successfully syndicated to (or to entities affiliated with) Credit
Suisse, Goldman Sachs, Fortress Investment Group and a major North
American financial institution.
The Company's liquid assets stood at approximately $1.10 billion as of end of day May 8, 2017 and combined with the undrawn amount
of $600 million under the facility
led by HOOPP, the Company's aggregate available liquidity and
credit capacity totaled approximately $1.70
billion.
Home Trust's High Interest Savings Account (HISA) deposit
balances are expected to be approximately $146 million on May
9 after the settlement of transactions that took place
on
May 8.
Guaranteed Investment Certificate (GIC) deposits, including
Oaken and broker GICs, stood at approximately $12.64 billion as at May
7. Oaken savings accounts stood at approximately
$165 million as at May 7.
Home Trust's GICs and HISA deposits are eligible for Canada
Deposit Insurance Corp. coverage.
Caution Regarding Forward-looking Statements
This press release contains forward-looking information within
the meaning of applicable Canadian securities legislation. Please
refer to the Home Capital's 2016 Annual Report, available on Home
Capital's website at www.homecapital.com, and on the Canadian
Securities Administrators' website at www.sedar.com, for Home
Capital's Caution Regarding Forward-looking Statements.
About Home Capital Group Inc.
Home Capital Group
Inc. is a public company, traded on the Toronto Stock Exchange
(HCG), operating through its principal subsidiary, Home Trust
Company. Home Trust is a federally regulated trust company offering
residential and non-residential mortgage lending, securitization of
insured residential mortgage products, consumer lending and credit
card services. In addition, Home Trust offers deposits via brokers
and financial planners, and through its direct to consumer deposit
brand, Oaken Financial. Home Trust also conducts business through
its wholly owned subsidiary, Home Bank. Licensed to conduct
business across Canada, Home Trust
has offices in Ontario,
Alberta, British Columbia, Nova Scotia, Quebec and Manitoba.
SOURCE Home Capital Group Inc.