There’s going to be a lot of Home Capital Group (HCG) announcements as this saga unfolds in coming days. We’ll track them here…
Update #3: April 27, 3:40 P.M.
- In an email today to brokers, Home Trust EVP, Pino Decina stated: “Home Trust has weathered difficult times during its 30-year history, and has always risen above…We are taking the necessary steps to deal with this situation…If your client has a mortgage with us, rest assured nothing has changed.”
- Home’s apparent funder has a conflict, says law professor: “HOOPP President and Chief Executive Officer Jim Keohane sits on Home Capital’s board and is a shareholder of the mortgage lender.” (More from Bloomberg)
- Home Capital’s stock has made a new high on the day (an important short-term positive that suggests the balance of investors aren’t giving up on the company and/or think it will be successfully sold)
Update #2: April 27, 1:05 P.M.
- Bank analyst: “We now assume that Home Capital will not be able to access sufficient deposit funding going forward, and the company will likely move into liquidation mode.” (This same analyst simultaneously raised his rating of HCG from hold to speculative buy.)
- “We think [a sale] is at a substantial premium to current levels. We believe HCG’s book may be attractive to several banks that could run the business with materially lower funding costs, particularly if they have regulatory support for the deal.”—GMP Securities analyst Stephen Boland (via Bloomberg)
- HCG is expected to axe its dividend to preserve cash flow.
Update #1: April 27, 11:00 A.M.
- A sale seems increasingly likely. HCG has retained RBC Capital Markets and BMO Capital Markets “to advise on further financing and strategic options.”
- Its high interest savings deposits are reportedly down to roughly $814 million versus ~$2 billion last month, a roughly $600 million outflow of depositors in the last few days
- The company now says it has a firm $3.5 billion in current liquidity and $12.98 billion in outstanding GICs.
- Healthcare of Ontario Pension Plan is reportedly the emergency lender that gave Home a liquidity lifeline yesterday
- The stock (symbol: HCG-TSX) has rebounded 13% to $6.99 (too early to call it a dead cat bounce)
- Amid all the downgrades, a few analysts have raised their ratings of Home’s stock to “buy” and “outperform”
- Big banks are reportedly limiting client investments in Home GIC’s to $100,000, CDIC’s insurance limit.
- “We have a hard time viewing the challenges (Home Capital) is facing as a systemic event, particularly since there is no indication of credit deterioration in the mortgage portfolio of (the company)…With the market cap of HCG having dropped to ~$400m we are skeptical that any of the banks will step up as a buyer of the company. At this stage of the HCG fallout a purchase of the underlying loan book would be a more straight-forward process than an acquisition of the common equity.”—Scotiabank (via BNN)