The channel lender is set to secure a $2 billion line of credit to secure against mortgages.
, has reached a non-binding agreement in principle with a major institutional investor for a credit line in the amount of $2 billion,” Home Capital said in a release early Wednesday. “It is expected that a firm commitment will be agreed to later today. The $2 billion loan facility would be secured against a portfolio of mortgages originated by Home Trust.”
Home Capital’s shares were down 41% at the market open were down nearly 60% at press time.
The lender said the credit line is intended to “mitigate” falling high interest savings account balances.
“HISA balances have fallen by $591 million in the period from March 28 to April 24. The total HISA balance stood at approximately $1.4 billion as at April 24,” Home Capital said. “The Company anticipates that further declines will occur, and that the credit line would also mitigate the impact of those.”
The terms of the loan require a non-refundable commitment fee of $100 million and an initial draw of $1 billion. The interest rate on outstanding balances will be 10%.
It’s been a volatile few weeks for the channel lender.
Earlier this month, the OSC issued a notice of hearing and statement of allegations that named the company and former chief executives Gerald Soloway and Martin Reid. It also named current CFO Robert Morton.
Home Capital suspended 45 brokers in the summer of 2015 for allegedly falsifying mortgage documents.
The OSC alleges the Toronto-based lender misled shareholders following in its financial statements and a 2015 conference call by not sufficiently providing all the facts about the case.
Following the regulator announcement, Home Capital announced Soloway had stepped down from his board of director position and that Morton would be taking on a new role with the company.