Home Capital Slumps as New Loan Flags ‘Existential Crisis’

Home Capital Group Inc.’s shares plunged more than 60 percent after the mortgage lender disclosed a costly new loan to tide it over as its deposits dwindle, intensifying a spiral of bad news for the company.

The C$2 billion ($1.5 billion) loan is coming from an institutional investor that Home Capital did not identify, and the lender’s agreement is non-binding. With a 10 percent interest rate plus other fees and charges, the company is effectively paying 22.5 percent on the first C$1 billion it borrows, which falls to 15 percent if it uses the full C$2 billion available to it, according to Jaeme Gloyn, an analyst at National Bank of Canada.