TORONTO May 12 Shares in Home Capital Group Inc
fell as much as 20 percent in early trading on Friday
after the lender said uncertainty around future funding had cast
doubt about whether it could continue as a going concern.
Shares in Canada's biggest non-bank lender hit a low of
C$8.70 in early deals before recovering to trade down 11 percent
Home Capital issued first-quarter results after the market
closed on Thursday, alongside which it stated that: "Management
believes that material uncertainty exists regarding the
company's future funding capabilities as a result of
reputational concerns that may cast significant doubt upon the
company's ability to 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Depositors have withdrawn nearly 94 percent of funds from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, charging
interest of 10 percent on outstanding balances. Home Capital has
so far drawn down C$1.4 billion from the facility but is hoping
to secure alternative funding on more favourable terms.
In a conference call with investors on Friday, Chief
Financial Officer Robert Morton confirmed the company is
considering selling assets to enable it to refinance quicker and
pay off the emergency loan provided by HOOPP.
"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.
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)