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Imperiled Home Capital lining up bank syndicate for $2-billion loan: sources

The entrance to Home Capital’s headquarters in Toronto. (CHRIS HELGREN/REUTERS)

Home Capital Group Inc is in talks with a syndicate of banks, including some of Canada’s biggest lenders, to secure a loan of about $2-billion to replace a costly emergency credit line it acquired in April, people with knowledge of the matter told Reuters.

Royal Bank of Canada, Bank of Montreal and Toronto-Dominion Bank are among the lenders that are expected to be part of the syndicate, the people said on condition of anonymity as the talks were confidential.

Home Capital has held talks with each of the country’s biggest six banks, but not all are expected to participate, the sources said.

Credit Suisse, Goldman Sachs and other international banks are also in discussions with Home Capital, and it is possible that a global bank may be part of the syndicate, they said.

Depositors have withdrawn 95 per cent of funds from Home Capital’s high interest savings accounts since March 27, when the company terminated the employment of former Chief Executive Martin Reid.

The withdrawals accelerated after April 19, when Canada’s biggest securities regulator, the Ontario Securities Commission, accused Home Capital of making misleading statements to investors about its mortgage underwriting business. The company has said the accusations are without merit.

The rate of withdrawals from savings accounts and Guaranteed Investment Certificate (GIC) deposits, a key source of funding, have slowed since the middle of May.

Home Capital, is seeking an interest rate of 2 to 3 per cent above the cost of funds, though it is not clear if it will manage to secure a loan within that preferred range, the people said.

Home Capital declined to comment.

RBC, Toronto-Dominion Bank, Credit Suisse and Goldman Sachs also declined to comment. BMO did not immediately respond to requests for comment.