06/20/2017 06:11 EDT | Updated 06/20/2017 06:20 EDT

Home Capital inks deal to sell $1.2B of mortgage assets to KingSett Capital

TORONTO — Home Capital Group is selling $1.2 billion in mortgage assets to real estate-focused private equity firm KingSett Capital as it looks to stabilize its position following a flood of customer withdrawals from their savings accounts.

The deal will allow Home Capital (TSX:HCG) to reduce its debt, after taking on an emergency $2-billion line of credit with onerous terms from the Healthcare of Ontario Pension Plan.

The alternative mortgage lender says it expects to lose approximately $15 million on the transaction.

Home Capital says KingSett will buy the portfolio for 99.61 per cent of its outstanding principal value, less a share of future credit losses.

The company will initially receive 97 per cent of the outstanding principal value of the mortgages. The remainder will be subject to any credit losses in the portfolio.

The announcement comes after the company agreed last week to settle both an Ontario Securities Commission case and a class-action lawsuit filed by investors. The agreements are subject to OSC and court approval.

"This transaction will help the company further stabilize its liquidity position and highlights the flexibility and options created by the quality of our assets," Bonita Then, Home Capital's interim president and CEO, said in a statement.


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