Home Capital Said to See Long Road to Revive Firm's FortunesBy
Exploring options beyond loan-replacement funding from banks
Search for new CEO yielding candidates in and outside Canada
Home Capital Group Inc.’s efforts to regain stability could take months, and all options are on the table including a backstop from Canada’s biggest banks, according to a person familiar with the company’s plans.
The C$30 million ($23 million) settlement with the Ontario Securities Commission announced late Wednesday wasn’t a precondition to win a loan to replace costly rescue financing, the person said. So it won’t speed up the funding process or other deals being discussed, according to the person, who asked not to be identified as the plans are private.
While the Toronto-based company is in talks with Canada’s six biggest banks to replace the C$2 billion credit line from Healthcare of Ontario Pension Plan, a deal with those lenders isn’t necessarily a given since the firm is also in talks with other entities, the person said. Potential lenders joining the Canadian banking group may include Credit Suisse Group AG and Goldman Sachs Group Inc., according to other people familiar with the matter. Private-equity firms Onex Corp. and Catalyst Capital Group Inc. as well as Brookfield Asset Management Inc. have discussed various transactions with the company, other people familiar have said.
What is certain, is that the settlement buys Home Capital time to find a deal it’s comfortable with. Shares surged as much as 20 percent Thursday, paring this year’s drop to about 55 percent, and RBC Capital Markets upgraded its recommendation to hold from sell.
Home Capital and three former executives reached settlements with the OSC, which began hearings last month on allegations Home Capital misled investors about mortgage fraud some two years earlier. The firm will face little in terms of out-of-pocket costs from the settlement, since it’ll be covered by liability insurance.
The sale of assets -- such as Home Capital’s credit-card portfolio, commercial mortgages and consumer lending business -- also remains an option, said the person, who added that there are no parts of the business that aren’t being reviewed in terms of sale, refinancing or keeping.
Home Capital is well down the road for its search for a new chief executive officer, using an outside recruitment firm to seek candidates in and outside Canada, the person said, without elaborating. Home Capital retained Caldwell Partners to search for a CEO, according to another person familiar with the matter.