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Thread: Home Capital Group (HCG)

  1. #171
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    One of the problems with this stock today is that BNN was reporting that this new line of credit carried an interest rate of 22.5%. That was why I looked into the situation because it pretty much screamed desperation. It was pretty tacky reporting by BNN, in my opinion. Here is the actual new release.

    http://web.tmxmoney.com/article.php?...&qm_symbol=HCG

    It's a $2 Billion line of credit. They are paying 10% on any outstanding balance and 2.5% on any available credit not used. They also are paying a whopping $100 million one time fee to set it up. I suspect that National bank financial (where BNN said they got their info) went on to say that in the first year if they borrow $1 Billion, they pay 10% on that, 2.5% on the Billion not borrowed and with the $100Million fee that makes the cost 22.5%. It does, but only in the 1st year.

    Anyway, I thought I would add that. There is no doubt that Home Capital was more then a little desperate to get this money, but with the withdrawals coming out of their High Interest Savings accounts and jargey3000 soon to withdraw his multi-hundred million dollar GIC, they probably had very little choice. As I said earlier it is a classic "run on the bank" situation.

    I suspect the next dividend will be cut and there is no doubt their EPS for 2017 will be negative, but it's what happens after 2017 that will be interesting to see. If they can get confidence back and Toronto real estate does not collapse, it will be a good investment. If they don't, stock investors will lose everything.

    All the above is just my opinion. Good luck with this one.

    Last edited by OptsyEagle; Today at 02:59 PM.

  2. #172
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    "multi-THOUSAND"

  3. #173
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    I guess for anyone with cash in their HISA, it takes little more than a mouse click to transfer your funds out, but even so, will this situation give anyone pause in playing this HISA game of swapping between HISA providers to get the best rate of the month?

    I admit I use to do that, but decided it frustrated me more than it was worth, and so a number of years ago, just moved all that cash into my TDDI account and bought TDB8150 at a meager 0.75%. Less return, less frustration, and much, much easier to take quick advantage of buying a stock when the situation presents itself.

    I suppose the ease at which the system has now allowed people to transfer funds with a mouse click is definitely working against HOME at this time.

    ltr

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  5. #174
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    Quote Originally Posted by OptsyEagle View Post
    ... that makes the cost 22.5%. It does, but only in the 1st year.
    Right. And after the first year it reduces to a paltry 12.5% with 1B/1B. I don't see how they can stay in business with money costing them this much. I wouldn't mind getting a piece of the 2.5% for NOT lending them money deal. I could NOT lend them a couple million I think.

    I can't imagine that this is an actual deal -- I think there is a grossly misreported typo somewhere.

  6. #175
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    I could afford to NOT lend them the entire $2 Billilon dollars. I wish they had called me first. I would have dropped the set up fee down a few million as well. lol.

  7. #176
    Senior Member NorthernRaven's Avatar
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    Quote Originally Posted by gibor365 View Post
    but until you get thos insurance money from CDIC can pass a lot of time, also not sure if GIC interest will be paid out
    Quote Originally Posted by leeder View Post
    There's always some worry. I only have about $15k in GICs with them maturing in 2019 and some small $ amount in their HISA. The total amount is well below $100k, but I do take comfort it is CDIC insured (principal only).
    CDIC covers both principal AND interest up to the $100K limits.

  8. #177
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    Quote Originally Posted by gardner View Post
    Right. And after the first year it reduces to a paltry 12.5% with 1B/1B. I don't see how they can stay in business with money costing them this much. I wouldn't mind getting a piece of the 2.5% for NOT lending them money deal. I could NOT lend them a couple million I think.

    I can't imagine that this is an actual deal -- I think there is a grossly misreported typo somewhere.
    It really is that bad. No, they can't stay in business with financing like that. They have $10B+ in GICs that will come due that are only costing them 1.5-2.5%. Not all at once, but they're out there, and there is no way for this company to replace even a fraction of them. It's why the stock is down 65% today and 86% from the 52 week high. 80%+ drops in stocks are usually indicative of permanent losses of capital. If I had shares in this, or EQB or FN or MIC or anything, I would sell now, even if I bought today.
    Last edited by doctrine; Today at 03:33 PM.

  9. #178
    Senior Member NorthernRaven's Avatar
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    Quote Originally Posted by gibor365 View Post
    but until you get thos insurance money from CDIC can pass a lot of time, also not sure if GIC interest will be paid out

    recently got email from Oaken that trying to calm down investors ... not sure it's a good sign
    Quote Originally Posted by leeder View Post
    There's always some worry. I only have about $15k in GICs with them maturing in 2019 and some small $ amount in their HISA. The total amount is well below $100k, but I do take comfort it is CDIC insured (principal only). There was an interesting article on BNN about three possible ways HCG would end: http://www.bnn.ca/three-ways-the-hom...-ends-1.732499

    I think this company will struggle but live on in the near future.
    Quote Originally Posted by gardner View Post
    Right. And after the first year it reduces to a paltry 12.5% with 1B/1B. I don't see how they can stay in business with money costing them this much. I wouldn't mind getting a piece of the 2.5% for NOT lending them money deal. I could NOT lend them a couple million I think.

    I can't imagine that this is an actual deal -- I think there is a grossly misreported typo somewhere.
    It is actually a $100 million fee, 10% on outstanding balance, and 2.5% on undrawn amounts from the $2 billion facility, with an initial draw of $1 billion. Assuming they don't draw down any more (things stabilize over the next few months, GICs don't crater), that would be $100M + $100M + $25M = $225M. The miniumum would be $150M+ if they somehow returned the initial draw fairly quickly; they would also save a bit ($10-15M?) on lower HISA interest being paid out. Their 2015 net income was just short of $300 million. So basically they seem to be saying that they are willing to sacrifice most of a year's profits to have a chunk of stable (albeit very expensive) funding and restore confidence in their HISA and GIC deposit base. For shareholders, this might be better than getting acquired way below book value, assuming the underlying business recovers to some sort of stable (if perhaps less lucrative) over the next year.


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