Home Capital has new $500m credit facility… if it needs it

by Steve Randall02 Jul 2018

A $500 million credit facility is now in place at Home Capital’s Home Trust Company.

The standby funding provided by the Bank of Montreal and Royal Bank of Canada replaces the previous $2 billion credit facility provided by Berkshire Hathaway Inc. that matured Friday.

In a statement, Home Capital says that it does not need to use the credit facility currently.

“The Company does not intend to draw on the Credit Facility in the ordinary course of business as its current liquidity profile provides sufficient liquidity and funding for its business activities. Any draws on the Credit Facility will be secured against a portfolio of mortgages originated by Home Trust Company,” the statement reads.

It was a year ago that the lender’s future was looking decidedly shaky as deposits slumped and funding from Canada’s big banks was arranged to keep the business operating.

Next came Warren Buffet’s Berkshire Hathaway investment in Home Capital which was seen as more than just funding, it was a vote of confidence for the struggling lender.

Although non-bank lenders may suffer more from the tightened B-20 mortgage regulations introduced at the start of the year, Home Capital gets a positive view from investment analysts Seeking Alpha.

It says the firm is “well capitalized with strong growth in mortgage originations,” and says that its share price could increase if mortgage origination growth remains consistent and it increases its net interest margin.

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