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Home Capital Corp. says its expenses soared $ 175 million above normal during the second quarter as it fought to survive a cash shortage that erupted as customers withdrew most of the money they had deposited in the company’s savings accounts.
The estimate includes a previously reported $ 100 million in fees and transaction costs related to $ 2-billion of emergency funding that Home Capital borrowed from the Healthcare of Ontario Pension Plan (HOOPP) to deal with the cash crunch.
Home Capital says it also had a loss on the sale of some of its asset portfolio and higher than normal professional, legal and interest costs during the quarter.
Read more:Warren Buffett swoops in as Home Capital’s lender of last resort
On a more positive note, Home Capital says it’s encouraged by the inflows of deposits since it got a vote of confidence from famed billionaire Warren Buffett, whose Berkshire Hathaway will invest up to $ 400 million in the company.
The company said the Toronto Stock Exchange has given conditional approval, as expected, for Berkshire’s initial investment of $ 153.2 million to acquire 16 million Home Capital shares, or about 20 per cent of the company’s total equity.
A second round of investment from Berkshire, which would buy a further $ 247.7 million worth of Home Capital stock and raise its ownership stake to 38.4 per cent. That investment requires shareholder approval at a special meeting later this year.
Home Capital’s update was issued ahead of today’s annual shareholders meeting in Toronto.