Home Capital Group has announced that its subsidiary, Home Trust Company, has entered into an agreement with KingSett Capital, on behalf of KingSett Real Estate Mortgage LP No. 3 and KingSett High Yield Fund.

Home Capital Group has agreed to sell a portfolio of commercial mortgage assets valued at approximately $1.2 billion. This announcement is in keeping with the company’s previous disclosure that it was pursuing financing and strategic options.

Transaction highlights

  • Under the terms of the agreement, KingSett will purchase the portfolio for 99.61% of outstanding principal value, less a share of future credit losses.
  • The initial gross proceeds to Home Capital Group will be 97% of the outstanding principal value of the mortgages. The balance of the purchase price will be subject to credit losses in the portfolio.
  • Based on the company’s expectations with respect to credit performance, and after allowing for transaction costs and the write-off of deferred origination costs related to the portfolio, the company expects to record a loss on the transaction of approximately $15 million, before income taxes.
  • The transaction is expected to close in two tranches during the company’s third quarter of 2017. Net cash proceeds to the company in the third quarter of 2017 are expected to be approximately $1.16 billion.
  • The transaction is subject to certain customary closing conditions.

BMO Capital Markets and RBC Capital Markets acted as financial advisors to Home Capital in connection with the transaction.

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