TORONTO, June 29, 2017 /CNW/ - Home Capital Group Inc.
(TSX: HCG) ("Home Capital" or the "Company") is pleased to announce
the closing of the previously announced C$2
billion line of credit facility entered into by its
subsidiary, Home Trust Company, as borrower, with a wholly-owned
subsidiary of Berkshire Hathaway Inc. ("Berkshire"), as agent and
initial lender (the "New Credit Agreement"). The Company is also
pleased to announce it has entered into an agreement with a third
party for the sale of approximately $252
million of residential mortgages that is expected to close
and fund on June 30, 2017.
"This new credit agreement is an important backstop for Home
Capital as we move forward to put the Company in a stronger
position for success," said Bonita
Then, interim Chief Executive Officer of Home Capital.
"We expect enough liquidity to completely pay down the credit line
over coming months, and today's mortgage-sale transaction moves us
a step closer to that goal. At that point, the much lower standby
fee on this new credit facility will save our Company a significant
amount of money compared to the old credit line it replaces."
New Credit Agreement
The New Credit Agreement replaces, and is on substantially the
same terms as, the C$2 billion loan
facility made as of May 1, 2017
between Home Trust Company, as borrower, and a major institutional
investor (the "Old Credit Agreement"), except as follows:
- the interest rate on outstanding balances has been decreased to
9% (from 10%)
- the standby fee on undrawn funds has been decreased to 1% (from
2.5%)
- there is no upfront commitment fee
- funds drawn on the facility will continue to be pre-payable at
any time
- the facility matures one year from the initial funding date and
may not be terminated until the date on which the facility
matures
As previously announced, Berkshire acquired an approximate
19.99% equity interest in the Company today and has agreed to make
an additional equity investment which, subject to shareholder
approval, would result in Berkshire increasing its equity interest
to approximately 38.39%. If the board of directors of the Company
makes a change in its recommendation regarding the Berkshire
additional equity investment for any reason and shareholder
approval of the additional investment by Berkshire is not obtained,
then the terms of the New Credit Agreement described above shall
automatically increase to an interest rate on outstanding balances
of 9.5% and a standby fee on undrawn funds of 1.75%.
On closing, Home Trust Company drew approximately $1.65 billion on the New Credit Agreement to
repay all amounts outstanding under the Old Credit Agreement and
the Old Credit Agreement was terminated.
The Company does not currently intend to draw further on the New
Credit Agreement, except to the extent that alternative sources of
liquidity on better terms are unavailable to the Company. The
Company expects to have sufficient liquidity over the coming months
to repay all amounts outstanding under the New Credit Agreement
through other sources of funding currently under consideration.
However, there can be no assurance that such other sources of
funding will materialize or when, and therefore the Company may be
required to draw on the New Credit Agreement in greater amounts and
for longer periods than currently anticipated.
Sale of Residential Mortgages
The Company has entered into an agreement with a third party for
the sale of approximately 1100 residential mortgage loans for
proceeds of approximately $249.6
million, representing a purchase price equal to 99.07% of
the aggregate principal amount of such loans. The Company will use
the proceeds of the sale, which is expected to be closed tomorrow,
to repay amounts outstanding under the New Credit Agreement.
Caution Regarding Forward-looking Statements
This press release contains forward-looking information
within the meaning of applicable Canadian securities legislation,
including relating to the timing, completion and consequences of
the transactions described in this press release and the Company's
expectations regarding its future liquidity and access to debt
financing. 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.
About Berkshire Hathaway Inc.
Berkshire Hathaway and its subsidiaries engage in diverse
business activities including insurance and reinsurance, utilities
and energy, freight rail transportation, finance, manufacturing,
retailing and services. Common stock of Berkshire is listed on the
New York Stock Exchange, trading symbols BRK.A and BRK.B.
SOURCE Home Capital Group Inc.