TORONTO, June 5, 2014 /CNW/ - Home Capital Group Inc. ("Home Capital") (TSX:HCG) announced today that its wholly owned subsidiary, Home Trust Company ("Home Trust") has agreed with its customer National Energy Corporation ("National") on the termination and repayment of financing arrangements currently totaling approximately $236 million related to National's sales and rentals of water heaters.
Earlier today, National's parent company, Just Energy Group, Inc., announced that it has entered into an agreement to sell the shares of National to Reliance Comfort Limited Partnership (the "Sale Transaction"). In connection with the Sale Transaction, National and Home Trust will terminate their financing arrangements.
The termination and repayment will be effective on closing of the Sale Transaction. The Sale Transaction is subject to, among other things, the approval of the federal Competition Bureau. The agreement between National and Home Trust includes compensation to Home Trust for the early termination of the water heater financing arrangements. Home Trust's compensation is expected to be in the range of $32 million to $38 million (before tax). This will compensate Home Trust for interest that would have been received over the original contractual terms of the financing arrangements, which extended over a range of periods ending in 2023. Home Trust will continue to provide financing to National until closing of the Sale Transaction.
At closing of the Sale Transaction, National will repay to Home Trust the outstanding financing, along with the associated early termination compensation, which will be recorded in the consolidated income of Home Capital. The amount of the early termination compensation will depend on the amounts and remaining contractual terms of the financing arrangements at closing of the Sale Transaction. Following that date, no further interest income from National will be recorded by Home Trust.
About Home Capital and Home Trust
Home Capital Group Inc. is a public company, traded on the Toronto Stock Exchange (HCG), operating through its principal subsidiary, Home Trust Company. Home Trust is a federally regulated trust company offering deposits, residential and non-residential mortgage lending, securitization of insured residential first mortgage products, consumer lending and credit card services. Licensed to conduct business across Canada, Home Trust has offices in Ontario, Alberta, British Columbia, Nova Scotia, Quebec and Manitoba.
Caution Regarding Forward-looking Statements
This press release contains forward-looking information within the meaning of applicable Canadian securities legislation. Please refer to the Home Capital's 2013 Annual Report, available on Home Capital's website at www.homecapital.com, and on the Canadian Securities Administrators' website at www.sedar.com, for Home Capital's Caution Regarding Forward-looking Statements.
SOURCE Home Capital Group Inc.