04/26/2017 06:38 EDT | Updated 04/26/2017 06:40 EDT

Home Capital shares plunge after signing deal for $2-billion credit line

TORONTO — Home Capital Group Inc. (TSX:HCG) shares lost more than half their value in early trading on Wednesday after the mortgage lender warned it would be unable to meet previously announced financial targets under the terms of a new credit line it is working to secure.

Home Capital's stock had already fallen sharply last week after staff at Ontario's securities regulator alleged the company, two former CEOs and the current CFO broke the law in their handling of a scandal involving falsified loan applications. The company has said the allegations are without merit and vowed to defend itself.

The company on Wednesday said that its Home Trust subsidiary has reached a non-binding agreement in principle with a unidentified major institutional investor for a $2-billion credit line, but that the terms of the proposed agreement would have a material impact on earnings. It said it expected that a firm commitment for the credit line will be agreed to later today.

The company said the money is intended to mitigate the impact of a decline in its high-interest savings account balances that has occurred over the past four weeks and that has accelerated since April 20.

Home Capital said Wednesday high-interest savings account balances have fallen by $591 million in the period from March 28 to April 24. The total high-interest savings account balance stood at roughly $1.4 billion at April 24.

Shares in Home Capital fell $10.10 to $6.99 in early trading on the Toronto Stock Exchange.