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HomeTrust On Sale (Oaken Financial)
May 27, 2017
11:16 am
User230
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Top It Up said
"...along with a proposed candidate for a new CEO and proposed new board candidates."

That deal was NEVER close - HCG's hubris won out and they refused to accept the "banks" conditions - as they say, it was a non-starter from the get-go.  

BNN is just trying to make news out of nothing... I dislike BNN.

May 27, 2017
11:50 am
Norman1
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Top It Up said
"...along with a proposed candidate for a new CEO and proposed new board candidates."

That deal was NEVER close - HCG's hubris won out and they refused to accept the "banks" conditions - as they say, it was a non-starter from the get-go.  

No, they didn't. Read the article. "Mayday at Home Capital", page B1, Saturday May 13, 2017, The Globe & Mail Weekend.

Bankers can sometimes provide more than just money. In this case, their board members could also provide introductions to credible people, who would be interested in being CEO or on the board to turn around the company and who didn't have unresolved issues with the OSC.

That was the opening offer from the bank syndicate. Everything in the opening offer doesn't always make it into the final agreement. But, all that negotiation plus the diligence takes time. Unfortunately, Home Trust and Home Bank didn't have that much time left.

May 27, 2017
12:03 pm
Top It Up
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Really!

It's called he who pays the piper, calls the tune.

The banks wanted THEIR people running the shop with THEIR money . not the rascals who put HCG in this position. NOW, the big banks want no part of it.

-------------------------------

Still waiting for all the white knight companies to STEP- UP to the plate and take over this supposedly rock solid company ... where are they?

May 27, 2017
12:30 pm
frank87
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Top It Up said
Really!

It's called he who pays the piper, calls the tune.

The banks wanted THEIR people running the shop with THEIR money . not the rascals who put HCG in this position. NOW, the big banks want no part of it.

-------------------------------

Still waiting for all the white knight companies to STEP- UP to the plate and take over this supposedly rock solid company ... where are they?  

You're quite an interesting fellow.

You insist on other people providing facts to support their assertions and after they do, you resort back to baseless insinuations.

Home didn't even have a CEO and they were looking for board members with strong reps. That was not a sticking point. In fact, they are still looking for a CEO, preferably one who has some name and prestige. Obviously, after they took on the HOOPP deal, confidence fell dramatically and all bets were off. This was a huge mistake and likely one made by a panicky Board.

May 27, 2017
12:43 pm
Top It Up
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Sounds like you're a wee bit short of real world experience ie. when it comes to corporate take-overs, mergers and buyouts AND who calls the shots in those instances. When you're only playing from a position of weakness, like HCG, you only get to listen - no one in the room is interested in what HCG have to say - irrespective of what Alan Hibben and the rest of the board says publicly, they only get to listen in the negotiating room.

That's how it is in the REAL world - hence the lousy deals with both HOOPP and MCAP and anything that comes down the pike here after.

May 27, 2017
1:04 pm
Typhoon
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Based on what I've read, the only reason the Home Capital Board accepted the onerous terms of the HOOP credit line was because of time constraints. They did have negotiations underway with other companies, but money was being withdrawn at such a fast pace that it got to the point that they had no choice but to accept HOOP's offer, or close their doors. And I've also heard it hinted that the regulators were urging them to do the former (probably because they feared the potential fallout if they did the latter).

Everyone (except the short sellers) seem to agree that Home Capital has a very strong core business, and that if they can only find a way to restore confidence they should be able to recover from this situation (albeit with a different business model going forward). Knowing that, and knowing their importance to the Alternative Mortgage Market (and therefore to the price stability of the overall housing market), I think there IS a role for the Government to play in helping restore confidence in this Lender.

The Big Banks are naturally hesitant to extend a more favourable Line of Credit given the current uncertain environment, but that would likely change if the Government signalled a willingness to get involved. A short term Government loan at lower rates, designed to give Home Capital the opportunity to negotiate a more favourable credit line with the Big Banks, would also help restore consumer confidence in this particular company.

If this company is allowed to go under, EVERYONE loses. But as there is a lot of benefit to helping it survive, I have to wonder why the Government wouldn't consider it? If the money that had to be paid out in the form of deposit insurance was instead made available to Home Capital in the form of a repayable loan, even the Government would be better off at the end of the day than if they chose to allow the company to fail.

May 27, 2017
1:27 pm
Bill
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Not EVERYONE loses, I don't lose a penny if Home goes under. But, sure, like Canadian children in elementary school, a bank can never fail. The "Government" (i.e. let the Liberals put taxpayers yet more in debt) or "the big banks" must step in to make sure nothing bad ever happens anywhere to anyone. As Canadians let's facilitate and enable and indeed reward (by denying the same support to those who do things right) incompetence and/or negligence, thereby insuring we see lots more of it in the future.

May 27, 2017
1:39 pm
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Typhoon said

... but that would likely change if the Government signalled a willingness to get involved. A short term Government loan at lower rates, designed to give Home Capital the opportunity to negotiate a more favourable credit line with the Big Banks, would also help restore consumer confidence in this particular company. 

Long before any taxpayer money gets involved, how about just sell the "great" company off to a corporate salvage company, and be done with it.

May 27, 2017
2:11 pm
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I basically agree with you, Typhoon. Government exists to deal with issues that affect the population as a whole. People who are opposed to government spending which doesn't benefit them personally often lose sight of this.

But before someone says it with a nasty tone, let me point out that CDIC is financed by dues which the banks pay. Someone will correct me if I'm wrong, no doubt, but I don't think it's in the government's purse.

However, CDIC is the absolute last resort. Government intervention is the second last resort. They will only act if nothing else transpires - if they act.

May 27, 2017
2:22 pm
Bill
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Loonie, CDIC is not taxpayer money, correct. But Typhoon was not suggesting CDIC money, he suggested government help in the form of a loan.
And you indicate government "exists to deal with issues that affect the population as a whole." I agree, and so you can that it's inconsistent to say that Home's plight qualifies for government help as it only affects a relatively small proportion of the population.

May 27, 2017
2:32 pm
Loonie
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If my neighbour loses their house because they can't renew their mortgage and the value of the house goes down because fewer people can get mortgages, then I am definitely affected financially.
This is the issue which makes HCG's survival matter of public interest, not to mention the effects on the individuals directly ivolved. And this can be very contagious, just as short selling has brought on the current situation.

Coulda sworn somebody mentioned CDIC. Maybe that got deleted.sf-embarassed

May 27, 2017
2:35 pm
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Just maybe your neighbour was/is over extended and shouldn't have been given that mortgage in the first place.

NOT the taxpayer's responsibility.

May 27, 2017
2:39 pm
Loonie
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Top It Up said
Just maybe your neighbour was/is over extended and shouldn't have been given that mortgage in the first place.

NOT the taxpayer's responsibility.  

You're making this up, of course.
As you undoubtedly know, the paydown rate amongst HCG borrowers has been very high. Despite the rogue brokers, HCG has shown a remarkable ability to find value in lending which the other banks have missed entirely.

As far as I can recall, every government we've had has given money away to corporations. The question is why, how, and what is the return. Did it or did it not benefit Canadians in the long run? Some of this money has been given away without much diligence. I am remembering that there were corporations who were given a big hunk of money only to then up and move to Mexico or the US. Can't remember the specifics at the moment but it's happened more than once.

I am not suggesting the government should or should not financially support HCG. I don't know enough to make that decision. If they do, I expect accountability. And if they don't (and it would have been needed), then I also expect accountability for the fallout to both the innocent Canadians who took out legitimate mortgages with a legitimate bank and have been making their mortgage payments all along, and to others who will experience the side effects.

May 27, 2017
2:42 pm
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HCG, you, and others keep saying that YET no company has stepped forward to buy HCG - why is that?

May 27, 2017
2:48 pm
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Top It Up said
HCG, you, and others keep saying that YET no company has stepped forward to buy HCG - why is that?  

Not cheap enough yet.

May 27, 2017
2:50 pm
Loonie
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Top It Up said
HCG, you, and others keep saying that YET no company has stepped forward to buy HCG - why is that?  

Due diligence takes time, as you know. We don't necessarily know if an offer has been made or how may offers have been made. We will likely only hear about it if it goes through. Right now, they are holding their own and they still have cash to draw on. And they are awaiting the wisdom that will come from getting new board members and new CEO.
I don't think that's hard to understand.

May 27, 2017
4:38 pm
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Loonie said

Due diligence takes time, as you know. We don't necessarily know if an offer has been made or how may offers have been made. We will likely only hear about it if it goes through. Right now, they are holding their own and they still have cash to draw on. And they are awaiting the wisdom that will come from getting new board members and new CEO.
I don't think that's hard to understand.  

In the last earnings call the Board made it clear that they do not intend to sell presently because of the level of the current stock price. Even a substantial premium to the current stock price would be a fire sale and shareholders would not be happy about that. Their first priority is to find a way for the company to survive as an independent entity.

May 27, 2017
5:06 pm
AltaRed
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I am of the view government should not intervene, e.g. with a loan guarantee or similar, at least not until equity shareholders are wiped out. HCG should be left to solve its own situation best that it can... and I think that it can, either by selling itself, or re-creating a smaller HCG entity.

Equity shareholders need to bear the full burden as part of an overall healthy equity market. If the government (taxpayer) is always going to be around to bail out a failing company. there is no 'moral hazard' and both company managements and shareholders will become increasingly reckless.

Tis the same reason I loathe the 'bailouts' of Bombardier. Companies need to fail to keep the market honest. There will always be someone around to pick up the worthwhile pieces.

May 27, 2017
6:05 pm
Loonie
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I think the government has more tools than just simple bailouts anyway.

The problem with allowing companies to fail is the trail of wreckage they can leave behind, quite apart from shareholders' losses. Wreckage must, in some fashion, be addressed by government. It's their job. What exactly is to be done is another question. I'm open to answers but in my view regulation is an essential part of the solution, as prevention is better than cure.

Oddly, "corporate give-aways" have been condemned from both ends of the spectrum. I remember when the NDP, I think it was under David Lewis or Ed Broadbent, railed on against "corporate welfare bums". Good to know there is some possible meeting of the minds.

Perhaps, just perhaps, with the changes in the election spending rules (that would be called "regulation"), political parties will be less beholden to their corporate friends and feel less obligation to offer bailouts. Since they must still operate in the public interest, this may force them to seek better solutions on which we can agree.

May 27, 2017
6:18 pm
Bill
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Aside from the fact many millennials in GTA and elsewhere would benefit from lower house prices, it's incorrect to say a decline in the value of my home has a financial effect on me. Nothing changes, I keep living there and paying the same bills. (And if I gambled by buying an oversized house as an investment so I could cash in and downsize some day, well that should be no reason later to get my fellow citizens or taxpayers to help me out financially.) The only time it matters is when I sell to go to the old folks' home to die, but the average stay in those is about 18 months so I'm pretty sure it'll fetch enough for that. Or it might affect any heirs but again that's zero impact on me. But I fully understand there are some who feel they should be compensated by their fellow citizens whenever decisions they've freely made end up costing them more than they expected.

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