May 2, 2017 / 4:44 PM / 3 years ago

Apollo, Blackstone among potential bidders for Home Capital - sources

TORONTO/NEW YORK (Reuters) - Buyout firms Apollo Global Management LLC (APO.N), Blackstone Group LP (BX.N) and Centerbridge Partners LP are among potential suitors studying bids for Canada’s biggest alternative mortgage lender, Home Capital Group Inc (HCG.TO), people familiar with the matter told Reuters.

FILE PHOTO: The entry to the Home Capital Group's headquarters are seen in an office tower in the financial district of Toronto, Ontario, Canada, April 26, 2017. REUTERS/Chris Helgren/File Photo

Brookfield Asset Management (BAMa.TO) and Fairfax Financial Holdings Ltd (FFH.TO) are among other firms interested in buying Home Capital, which sought emergency funding last week, the people said, speaking on condition of anonymity as the discussions are private.

The stock was up about 7 percent before Reuters reported the possible interest, sending shares up as much as 16 percent to the day’s high of C$8.07, giving Home Capital a market value of about $378 million. It closed up 11.4 percent.

The potential bidders are working with investment banks as they consider their options and are likely to wait until a Canadian regulator holds a hearing on Thursday, the people said this week. The Ontario Securities Commission has accused Home Capital of making “materially misleading statements” to investors and named its current chief financial officer and two former chief executive officers.

Home Capital said last week it had hired RBC Capital Markets and BMO Capital Markets “to advise on further financing and strategic options” after securing a high-interest C$2 billion credit line.

Home Capital, Brookfield, Blackstone and Centerbridge declined to comment. Apollo and Fairfax did not immediately respond to requests for comment.

Home Capital is expected to sell at a discount to its book value, which is about C$1.6 billion, the people said. Non-bank lenders usually fetch between one to two times book value, they added.

Potential buyers are evaluating bids for the whole or part of Home Capital, the people said. Some smaller companies are looking at parts of Home Capital.

The loan from the Healthcare of Ontario Pension Plan, which was secured last week, has bought Home Capital some time, so a sale would not have to be rushed, the people said.

Some potential buyers believe the asset could be picked up at a good price and may look to unlock value in a turnaround of Home Capital once current issues surrounding the company are resolved, the people said.

Home Capital has seen nearly three-fourths of its high interest savings deposits pulled out. Its shares have shed 72 percent of their value since March 27.

On March 27, it lost Chief Executive Martin Reid and last month founder Gerald Soloway agreed to step down from the board.

It is not clear yet if Home Capital will sell itself to one buyer or if the assets would be broken up to multiple buyers, the people said.

Canada’s six biggest lenders have so far showed little interest in Home Capital, the people said.

Home Capital also delayed filing its first-quarter earnings report by eight days to May 11, from the company said in a statement on Tuesday.

Reporting by John Tilak in Toronto and Jessica DiNapoli in New York; Editing by Nick Zieminski and Andrew Hay

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