Money Home Capital receives new credit line as Buffett backing expires

18:56  16 may  2018
18:56  16 may  2018 Source:   bloomberg.com

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Home Capital Group Inc., the Canadian alternative lender that was bailed out by Warren Buffett ’s Berkshire Hathaway Inc., received a commitment for a new credit line from two banks as backing from the billionaire investor expires next month.

Home Capital Group Inc., the Canadian alternative lender that was bailed out by Warren Buffett ’s Berkshire Hathaway Inc., received a commitment for a new credit line from two banks as backing from the billionaire investor expires next month.

New houses stand in Brampton, Ontario, Canada, on Saturday, May 20, 2017.: Home Capital Receives New Credit Line as Buffett Backing Expires© Bloomberg/Bloomberg Home Capital Receives New Credit Line as Buffett Backing Expires

(Bloomberg) -- Home Capital Group Inc., the Canadian alternative lender that was bailed out by Warren Buffett’s Berkshire Hathaway Inc., received a commitment for a new credit line from two banks as backing from the billionaire investor expires next month.

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Home Capital Receives New Credit Line as Buffett Backing Expires . Home Capital Group Inc., the Canadian alternative lender that was bailed out by Warren Buffett ’s Berkshire Hathaway Inc., received a commitment for a new credit line from two banks as backing from the billionaire investor

Starting in July, the two-year, 0-million credit facility will replace an existing -billion line of credit from Berkshire Hathaway Inc. – the firm run by billionaire investor Warren Buffett , which is Home Capital ’s largest shareholder. Berkshire didn’t want to repeat the credit line after it expires in June

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The two-year $500 million loan from two Canadian banks to Home Trust Company will replace a $2 billion credit line from Berkshire, Home Capital said in a statement Wednesday. Buffett stepped in to backstop Toronto-based Home Capital last year after it was found by regulators to have improperly disclosed falsified home-loan applications and short-sellers targeted the stock.

The new loan results in a lower aggregate cost than the existing facility, Home Capital’s Chief Financial Officer Brad Kotush said in a statement. “We have significantly reduced our reliance on demand deposits for funding.”

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Share: Home Capital Group Inc., the Canadian alternative lender that was bailed out by Warren Buffett ’s Berkshire Hathaway Inc., received a commitment for a new credit line from two banks as backing from the billionaire investor expires next month.

Home Capital Group Inc., the Canadian alternative lender that was bailed out by Warren Buffett ’s Berkshire Hathaway Inc., received a commitment for a new credit line from two banks as backing from the billionaire investor expires next month.

The terms of the new line of credit includes a 0.75 percent upfront commitment fee, 0.6 percent annual standby charge on any unused portion and an interest rate on the drawn portion equal to three-month the Canadian Deposit Offered Rate plus 150 basis points. Three-month CDOR stands at about 1.75 percent so the interest rate would be about 3.25 percent.

The previous credit agreement from Berkshire carried about a 9 percent interest rate on outstanding balances and 1 percent on the undrawn funds.

Berkshire didn’t immediately respond to a request for comment left with an assistant.

Home Capital shares have risen 59 percent in the past 12 months to $14.13. Berkshire holds about a 20 percent stake, according to data compiled by Bloomberg.

To contact the reporter on this story: Natalie Wong in Toronto at nwong133@bloomberg.net

To contact the editors responsible for this story: Daniel Taub at dtaub@bloomberg.net, ;David Scanlan at dscanlan@bloomberg.net, Jacqueline Thorpe

©2018 Bloomberg L.P.

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