Home Capital has announced a new standby credit facility from two of Canada’s ‘schedule 1’ banks.
The $500 million line of credit will be in place for two years and replaces the $2 billion credit facility owned by a subsidiary of Berkshire Hathaway that matures in July 2018.
The two banks providing the facility have not been named by Home but those in the schedule 1 category include the Big 6 along with Canadian Western and Laurentian.
As a sign of Home’s improving fortunes, the announcement highlights that “The Company does not inhttps://ca.res.keymedia.com/files/image/iStock-toronto-financial-district-business-banks-buildings-501444563(1).jpgtend to draw on the Credit Facility in the ordinary course of business as its current liquidity profile provides sufficient liquidity and funding for its business activities.”
If the credit facility is used, it will be secured on a portfolio of mortgages originated by Home Trust Company.
Better alignment with current Home liquidity
“This Credit Facility is better aligned with our current liquidity and funding profile and results in a lower aggregate cost than the existing credit facility it is replacing,” said Brad Kotush, Executive Vice President and Chief Financial Officer. “We have significantly reduced our reliance on demand deposits for funding. This facility will provide us with standby liquidity in excess of the Company’s current and planned demand deposit exposures when combined with our current level of liquid assets.”
The terms of the credit facility are a 0.75% upfront commitment fee, a 0.60% annual standby charge on any unused portion, and an interest rate on the drawn portion equal to 3-month CDOR plus 150 basis points.
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