Mortgage Finance Firm MCAP Said to Seek C$275 Million in IPO

  • Company said to plan Toronto listing as soon as July
  • Stock sale would be the largest in Canada since October

MCAP Corp., a Canadian mortgage finance company, will seek to raise about C$275 million ($212 million) through an initial public offering as soon as next month, according to people with knowledge of the company’s plans.

The Toronto-based business, which has about C$55 billion of mortgages under administration, filed a preliminary prospectus with Canadian regulators last month for an IPO. MCAP plans to list its shares on the Toronto Stock Exchange and hired Royal Bank of Canada and Bank of Montreal to lead the sale, regulatory filings show. A spokesman for MCAP declined to comment.

If MCAP’s IPO goes through as indicated, it would be the largest in Canada since Hydro One Ltd.’s C$1.83 billion stock sale last October. It also would be only the second IPO to raise more than C$100 million this year amid a drought of new issuance due to volatile equity markets. Mainstreet Health Investments raised about C$124 million after its reverse takeover of Kingsway Arms Retirement Residences Inc. Kew Media Group Inc., a special purpose acquisition corporation, said Friday it raised C$70 million by selling shares in its IPO.

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Canada’s second-largest mortgage finance company originates and underwrites mortgages and funds them by selling the loans to institutional investors including banks, pension funds, trust companies and insurers, and then collecting service fees thereafter. As a result, it is only temporarily exposed to direct credit risk before the mortgages are transferred to the investors, the company said in a May 25 filing.

MCAP has expanded in Canada’s C$1.5 trillion mortgage market along with demand for home financing and real estate investment in Canada’s two hottest real estate markets. Residential sales in Vancouver and Toronto surged to a record in May, according to local real estate boards, leading the country’s housing market.

Home loans outstanding have consistently increased on a year-over-year basis since 1990, across economic cycles and through market downturns, the firm said in the filing. Growth in the single-family mortgage market, is primarily driven by migration into Canada, resale activity and new homebuilding and low interest rates, MCAP said.

Shareholders of MCAP include MCAN Mortgage Corp. and Otera Capital CADCAP Inc., a subsidiary of the Caisse de Depot et Placement du Quebec.

MCAP had C$14.3 billion of mortgage origination and C$4 billion in mortgage renewals last year, filings show. The company has significant operations in the prime single-family residential mortgage market, and aims to have more than C$90 billion of mortgages under administration by 2020.

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