OMAHA (dpa-AFX) - Troubled mortgage lender Home Capital Group Inc. (HCG.TO) is hoping for a new lease of life with Warren buffet extending a helping hand by way of C$2 billion or $1.5 billion line of credit to its subsidiary Home Trust Co. The credit from the renowned investor will help end the strategic review of the lender and to settle a loan facility from an institutional investor.
Further, in an indirect private placement, Berkshire Hathaway Inc. (BRK.A, BRK.B) shall buy C$400 million of its stake. The acquisition will be initiated through Columbia Insurance Co. that will investment of C$153.23 million to acquire around 16 million shares. The initial investment will be equl to 19.99 percent equity stake on a post-issuance basis.
Warren Buffett stated that, 'Home Capital's strong assets, its ability to originate and underwrite well-performing mortgages, and its leading position in a growing market sector make this a very attractive investment.'
Each common share in the first phase investment will be issued at a price of C$9.55 per common share, which represented a 15 percent discount to the 5-day volume-weighted average price. The private placement will be closed on June 29, 2017.
Berkshire, through Columbia, has agreed to make an additional investment of C$246.77 million to buy 24 million shares, which together with its initial investment, would represent an approximate 38.39 percent equity stake. The stake will not provide Berkshire any rights to nominate directors or any governance rights, but only customary registration rights for transactions.
Earlier Home Capital's board have considered options including potential for a sale of all of the shares.
Brenda Eprile, chair of the Home Capital said, 'Berkshire's investment in Home Capital is a strong vote of confidence in the fundamental, long-term value of our business.'
Copyright RTT News/dpa-AFX