Exclusive: Canada’s Home Capital lining up bank syndicate for C$2 billion loan – sources

By John Tilak and Matt Scuffham

TORONTO (Reuters) – Home Capital Group Inc HCG.TO is in talks with a syndicate of banks, including some of Canada’s biggest lenders, to secure a loan of about C$2 billion ($1.5 billion) to replace a costly emergency credit line it agreed in April, people with knowledge of the matter told Reuters.

Royal Bank of Canada RY.TO, Bank of Montreal BMO.TO and Toronto-Dominion Bank TD.TO are among the Canadian lenders that are expected to be part of the syndicate, the people said on condition of anonymity as the talks were confidential.

The new loan will be on much more favorable terms than the existing C$2 billion loan provided by the Healthcare of Ontario Pension Plan (HOOPP), which came with an effective interest rate of 22.5 percent on the first C$1 billion drawn down, the people said.

Shares in Home Capital rose as much as 5.9 percent following Reuters report, having been down by 5.4 percent prior to the Reuters story.

Home Capital has held talks with each of the country’s biggest six banks, but not all are expected to participate, the sources said.

Credit Suisse CSGN.S, Goldman Sachs GS.N and other international banks are also in discussions with Home Capital, and it is possible that a global bank may be part of the syndicate, they said.

Depositors have withdrawn 95 percent of funds from Home Capital’s high interest savings accounts since March 27, when the company terminated the employment of former Chief Executive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. The company has said the accusations are without merit.