(Corrects paragraphs 10 to show quote was by Interim CFO Bob
Blowes, not Robert Morton as previously stated)
* Shares down as much as 20 percent on Friday
* Company does not expect deals in the coming weeks
* Company acknowledges uncertainty about future
* New director Hibben taking central role in talks
By Matt Scuffham
TORONTO, May 12 Home Capital Group Inc
confirmed on Friday it is considering asset disposals to enable
it to refinance more quickly and pay off an emergency loan
provided by the Healthcare of Ontario Pension Plan.
Shares in Canada's biggest non-bank lender fell by as much
as 20 percent in early trading on Friday before paring losses to
trade down 11.6 percent at 1230 EST.
After the stock market closed on Thursday, Home Capital
issued first-quarter results in which it said uncertainty around
future funding had cast doubt about whether it could continue as
a going concern.
Depositors have withdrawn nearly 94 percent of funds from
Home Capital's high-interest savings accounts since March 27,
when the company terminated the employment of former Chief
Executive Martin Reid.
The withdrawals accelerated after April 19, when Canada's
biggest securities regulator, the Ontario Securities Commission,
accused Home Capital of making misleading statements to
investors about its mortgage underwriting business.
Home Capital relies on deposits from savers to fund its
lending to borrowers, such as self-employed workers or newcomers
to Canada, who may not meet the strict criteria of the country's
Reuters reported on Thursday that Home Capital was in talks
to divest about C$2 billion in assets to help pay down a
high-interest loan, according to people familiar with the
The lender needs to raise funds to help repay a C$2 billion
loan from Healthcare of Ontario Pension Plan (HOOPP), which
provided the high-interest line of credit last month, the terms
of which impose an effective interest rate of 22.5 percent on
the first C$1 billion Home Capital borrows.
Home Capital has so far drawn down C$1.4 billion from the
facility but is hoping to secure alternative funding on more
In a conference call with investors on Friday, Interim Chief
Financial Officer Bob Blowes confirmed the company is
considering selling assets to enable it to refinance quicker and
pay off the emergency loan provided by HOOPP, which he said
would significantly impact the company's performance in 2017.
"Given the cost of the C$2 billion credit line repayment of
amounts, repayment of the amounts drawn under this facility in a
timely fashion is an essential part of management's plans. This
may necessitate asset dispositions," he said.
Alan Hibben, a former Royal Bank of Canada executive
who was brought in a week ago to bolster Home Capital's board,
replacing company founder Gerald Soloway, fielded many of the
questions on the call, which was the first time Home Capital
executives have spoken publicly since the withdrawal of deposits
sparked concerns over the lender's liquidity.
Hibben said he "fundamentally believed in the funding model
of Home Capital and the role that it played in the market".
"This company has faced a crisis in confidence and liquidity
but a number of steps have been taken to address both our
governance and near-term liquidity issues, which will provide a
platform which we can build on to assess our strategic
alternatives," he said.
Hibben said he was taking on a grater role, alongside
management, to address a "wide range of potential funding
sources and strategic transactions".
He added, however, that he did not expect deals in the
"We have some breathing room so that we can address medium
and longer-term issues in a thoughtful way. I don't expect there
to be any new, significant, transactions within the next days
and weeks," he said.
Home Capital disclosed data on Friday that showed the rate
of withdrawals by depositors was slowing, a day after the
company raised doubts about its ability to continue as a going
(Reporting by Matt Scuffham; Editing by Nick Zieminski)