Money Home Capital receives new credit line as Buffett backing expires

18:56  16 may  2018
18:56  16 may  2018 Source:

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Home Capital shares surge 27% as Warren Buffett 's Berkshire Hathaway buys stake. When it provided the line of credit , Berkshire Hathaway also bought a 0 million stake in Home Capital . Home Capital names veteran of Canadian mortgage industry as new CEO.

New houses stand in Brampton, Ontario, Canada, on Saturday, May 20, 2017.: Home Capital Receives New Credit Line as Buffett Backing Expires© Bloomberg/Bloomberg Home Capital Receives New Credit Line as Buffett Backing Expires

(Bloomberg) -- Home Capital Group Inc., the Canadian alternative lender that was bailed out by Warren Buffett’s Berkshire Hathaway Inc., received a commitment for a new credit line from two banks as backing from the billionaire investor expires next month.

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Home Capital had sought new funding to replace a costly emergency credit line it received on April 26 from the Healthcare of Ontario Pension Plan (HOOPP) after depositors rushed to withdraw funds from its high-interest savings accounts.

The board unanimously recommended selling the second tranche, arguing it would validate Mr. Buffett 's backing , enhance Home Capital 's stature in capital and deposit markets and provide extra Berkshire also collects a fee for providing Home Capital with a -billion standby credit line .

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The two-year $500 million loan from two Canadian banks to Home Trust Company will replace a $2 billion credit line from Berkshire, Home Capital said in a statement Wednesday. Buffett stepped in to backstop Toronto-based Home Capital last year after it was found by regulators to have improperly disclosed falsified home-loan applications and short-sellers targeted the stock.

The new loan results in a lower aggregate cost than the existing facility, Home Capital’s Chief Financial Officer Brad Kotush said in a statement. “We have significantly reduced our reliance on demand deposits for funding.”

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TORONTO — Home Capital Group Inc. (TSX:HCG) says American investment firm Berkshire Hathaway Inc. has agreed to indirectly acquire 0 million of its common shares in a private placement and provide a new billion line of credit to its subsidiary, Home Trust Company.

Home Capital Group Inc.'s shares surged higher on June 22nd on news that the troubled mortgage lender had arranged support from Buffet ; while the price initially increased to , it is now back to where it started before Buffett invsted. Buffett ,also, provided a billion credit line with a similar

The terms of the new line of credit includes a 0.75 percent upfront commitment fee, 0.6 percent annual standby charge on any unused portion and an interest rate on the drawn portion equal to three-month the Canadian Deposit Offered Rate plus 150 basis points. Three-month CDOR stands at about 1.75 percent so the interest rate would be about 3.25 percent.

The previous credit agreement from Berkshire carried about a 9 percent interest rate on outstanding balances and 1 percent on the undrawn funds.

Berkshire didn’t immediately respond to a request for comment left with an assistant.

Home Capital shares have risen 59 percent in the past 12 months to $14.13. Berkshire holds about a 20 percent stake, according to data compiled by Bloomberg.

To contact the reporter on this story: Natalie Wong in Toronto at

To contact the editors responsible for this story: Daniel Taub at, ;David Scanlan at, Jacqueline Thorpe

©2018 Bloomberg L.P.

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