gurpaul88 Posted May 24, 2017 Share Posted May 24, 2017 Drew another $250 million this week, leaving them with 350 from the HOOP loan. Link to comment Share on other sites More sharing options...
Guest 50centdollars Posted May 28, 2017 Share Posted May 28, 2017 http://www.financialpost.com/m/wp/fp-comment/blog.html?b=business.financialpost.com/fp-comment/dear-mr-morneau-its-time-to-step-in-and-save-home-capital Funny how these guys are begging for a bailout now that they realize there are no buyers for this crap. If the government bails this fraud out, it will be a sad day for taxpayers. Link to comment Share on other sites More sharing options...
Spekulatius Posted May 28, 2017 Share Posted May 28, 2017 Amazing how HCG can falter that quickly, even though there is no downturn in Canadian real estate yet. Imagine the fun when real estate prices take a nosedive. Link to comment Share on other sites More sharing options...
TBW Posted May 28, 2017 Share Posted May 28, 2017 The bailout thing is so ridiculous. If there is so much value here recapitalize it as equity holders. Sell 2bil of equity at the clearing price and borrowing costs should drop. If there is upside then you can realize it. Taxpayers already baring the risk, why am I guaranteeing the GICs of a CCC credit??? Idiots. The mortgage book of hcg is actually shorter dated than I thought. IF they can stabilize funding and run it off there could be some residual value to equity, if losses dont emerge. Lots of assumptions. Still a good chance its a 0, but not as certain as I was prior. Link to comment Share on other sites More sharing options...
rb Posted May 28, 2017 Share Posted May 28, 2017 Amazing how HCG can falter that quickly, even though there is no downturn in Canadian real estate yet. Imagine the fun when real estate prices take a nosedive. Nah man, HCG was always going to go to zero at some point. The only question was when. Turns out the answer is now. It's hard to see how even a majour RE crash takes down a top 5 bank. CIBC may have to answer some tough questions though. Link to comment Share on other sites More sharing options...
bizaro86 Posted May 29, 2017 Share Posted May 29, 2017 The bailout thing is so ridiculous. If there is so much value here recapitalize it as equity holders. Sell 2bil of equity at the clearing price and borrowing costs should drop. If there is upside then you can realize it. Taxpayers already baring the risk, why am I guaranteeing the GICs of a CCC credit??? Idiots. The mortgage book of hcg is actually shorter dated than I thought. IF they can stabilize funding and run it off there could be some residual value to equity, if losses dont emerge. Lots of assumptions. Still a good chance its a 0, but not as certain as I was prior. At the end of their 5 year terms, do you expect their borowers to refinance somewhere else? They'll have to offer renewals as otheraise they'll get tons of defaults. Link to comment Share on other sites More sharing options...
TBW Posted May 30, 2017 Share Posted May 30, 2017 Good question. Over 50% of hcg loan book is up for renewal in 1yr. Almost all of it renews in 2yrs. So you could have a situation where regulators encourage other banks to renew these clients to avoid mkt disruption. Or you could have some risk sharing between hcg and new provider. Since its so short-dated there is a chance, if housing stays flat, for some solution. Again I think hcg fails. But there is a small chance there could be something left. Another observation. They have 1.07bil of liquidity. 350mil from hoopp loan. That leaves only 720mil of liquidity, dont believe hoopp loan would count towards liquid coverage ratio (lcr). Since lcr is suppose to be enough assets to cover emergency for 30 days is 700mil enough? Today they lost 18mil, and inline with 20mil per day they have been losing. 600mil would only cover 30 days of gics maturing. They could be sub 600mil by next monday. At what pt does regulator say thats too little liquidity? Why not force them to sell 1 or 2bil of equity? Clearly they have some equity believers out there. If they cant get equity deal done does regulators then step in? Lack of any action here is a bit puzzling either by regulators or by hcg to raise cash. Fascinating to watch this play out. Link to comment Share on other sites More sharing options...
Mark Jr. Posted June 22, 2017 Share Posted June 22, 2017 Home Capital Reaches Agreement with Berkshire Hathaway for Investment of up to C$400 Million in Common Equity and Provision of New C$2 Billion Credit Facility http://www.newswire.ca/news-releases/home-capital-reaches-agreement-with-berkshire-hathaway-for-investment-of-up-to-c400-million-in-common-equity-and-provision-of-new-c2-billion-credit-facility-630038203.html Wtf. Link to comment Share on other sites More sharing options...
Yours Truly Posted June 22, 2017 Share Posted June 22, 2017 Just in the nick of time to save us from a slow melt occurringin Toronto RE.. thanks uncle Warren Link to comment Share on other sites More sharing options...
Guest 50centdollars Posted June 22, 2017 Share Posted June 22, 2017 This is incredible lol. WB got good terms on this deal. Big discount to the current market price. Interesting that Buffett will have no involvement with the company going forward. Wonder why he didn't ask for a board seat? I'm surprised by Buffett's comment. It doesn't sound like something he would say. HCG's underwriting was horrible. They gave mortgages to anyone. I dont really know what to think of this. Link to comment Share on other sites More sharing options...
Liberty Posted June 22, 2017 Share Posted June 22, 2017 Getting the equity at a 36% discount and lending at 9.5% isn't exactly saying that brk has high confidence, but I'm still very surprised by this. Link to comment Share on other sites More sharing options...
alertmeipp Posted June 22, 2017 Share Posted June 22, 2017 wow.. I am sure realtors will use this and tell clients even Buffet buys in Toronto RE. :o :o Link to comment Share on other sites More sharing options...
alpha Posted June 22, 2017 Share Posted June 22, 2017 I had to read the headline twice when It popped up last night. Interesting he is taking a 40% equity stake without taking a position on the board. Many of the shorts pointing out that Buffet bought Enron bonds in 2003 lol Link to comment Share on other sites More sharing options...
TBW Posted June 22, 2017 Share Posted June 22, 2017 Everyone saying that Buffett got a great deal as interest on LOC pays for most of stock position. That isn't true. From call, LOC is expected to be paid down in full in July. So really BRK only getting 1.75% standby fee. On equity, after loss from MCAP deal, HOOPP upfront 100mil, and CRE sale I think book value is ~$17 after both stock tranches close. Earnings still impaired from increasing costs of borrowing. I see them earning ROE's of 7% (very rough calc here). So not sure after initial pop that this trades much more than $17. Also, HCG still has loan loss reserves of 0.13%! If you simply increased them to 3%, which isn't crazy for a subprime lender, then book value would be ~$13. As someone that has been long BRK and short HCG for years, today is a weird day... Link to comment Share on other sites More sharing options...
bizaro86 Posted June 22, 2017 Share Posted June 22, 2017 I doubt they wanted a board seat, since that would increase reputation risk, and potentially reduce flexibility in selling the position. Link to comment Share on other sites More sharing options...
Green King Posted June 22, 2017 Share Posted June 22, 2017 Everyone saying that Buffett got a great deal as interest on LOC pays for most of stock position. That isn't true. From call, LOC is expected to be paid down in full in July. So really BRK only getting 1.75% standby fee. On equity, after loss from MCAP deal, HOOPP upfront 100mil, and CRE sale I think book value is ~$17 after both stock tranches close. Earnings still impaired from increasing costs of borrowing. I see them earning ROE's of 7% (very rough calc here). So not sure after initial pop that this trades much more than $17. Also, HCG still has loan loss reserves of 0.13%! If you simply increased them to 3%, which isn't crazy for a subprime lender, then book value would be ~$13. As someone that has been long BRK and short HCG for years, today is a weird day... Think with portals. If this was to blow up and wipe out the equity the compounding effects would create many opportunities for him as a whole and the option value of the money increase significantly. If not this book would run off party and he makes an ok return. Link to comment Share on other sites More sharing options...
obtuse_investor Posted June 23, 2017 Share Posted June 23, 2017 From Berkshire's perspective this is a tiny amount to commit. They are spending a total of US$1.8b -- this is a pocket change. Maybe warren is bored and tired of sitting in his hands? So much for looking for elephants. He is hunting mosquitos. Link to comment Share on other sites More sharing options...
TBW Posted June 23, 2017 Share Posted June 23, 2017 If the news articles can be believed, Buffett and Ted did little to no due diligence before this HCG acquisition. Read the G&M article if you have a subscription. I find it strange that Todd Combs, who is on the board of JPM, wasn't the one directly involved on Buffett's behalf. How these guys got comfortable with a subprime lender with 0.13% reserves that has fraud allegations and a declining funding base, so quickly to buy 40% boggles my mind. Between borrow rates sky-rocketing and Buffett, of all people buying in, shorting this stuff is hard. If/when the housing bubble bursts, I think Buffett will lose his $400mil. Question I have does this deal extend the bubble? Credit was constricting and the delusion of house price appreciation appeared to be ending. This deal may help credit (only temporarily?) and may help confidence. I am not sure. Any thoughts? Link to comment Share on other sites More sharing options...
gfp Posted June 23, 2017 Share Posted June 23, 2017 Its a good article. I was able to read it without the subscription through this link if it helps anyone else - https://www.pressreader.com/canada/the-globe-and-mail-bc-edition/20170623/281487866352736 Link to comment Share on other sites More sharing options...
Guest 50centdollars Posted June 23, 2017 Share Posted June 23, 2017 If the news articles can be believed, Buffett and Ted did little to no due diligence before this HCG acquisition. Read the G&M article if you have a subscription. I find it strange that Todd Combs, who is on the board of JPM, wasn't the one directly involved on Buffett's behalf. How these guys got comfortable with a subprime lender with 0.13% reserves that has fraud allegations and a declining funding base, so quickly to buy 40% boggles my mind. Between borrow rates sky-rocketing and Buffett, of all people buying in, shorting this stuff is hard. If/when the housing bubble bursts, I think Buffett will lose his $400mil. Question I have does this deal extend the bubble? Credit was constricting and the delusion of house price appreciation appeared to be ending. This deal may help credit (only temporarily?) and may help confidence. I am not sure. Any thoughts? He thinks it was a lack of confidence so if he put his name behind it, confidence will be restored but I dont really get it either. Why waste his time with this? I think it shows how hard it is for him to find investments these days. Like obtuse said, this is pocket change for them. But HCG offered him free money, so he took it. He has a gain of 90% in 1 day plus a 9% dividend yield going forward. It's not going to move the berkshire needle but its better then sitting in cash. I dont think he did full due diligence on this because I know that the underwriting was complete garbage at HCG so I was surpised by what he said. He didn't even know that his shares were locked up for 4 months. Doesn't sound like something he did a lot of DD on. Will this extend the bubble? It could. The media is already saying that Buffett likes Canadian real estate now lol. I guess I dont know what to think on this one. I understand it but dont at the same time. Link to comment Share on other sites More sharing options...
Jurgis Posted June 23, 2017 Share Posted June 23, 2017 Blue Horseshoe loves Home Capital Group. 8) Link to comment Share on other sites More sharing options...
fareastwarriors Posted June 23, 2017 Share Posted June 23, 2017 Short-Seller Nailed Home Capital, Then Got Stung by Buffett https://www.bloomberg.com/news/articles/2017-06-23/home-capital-short-seller-nailed-it-then-got-stung-by-buffett Link to comment Share on other sites More sharing options...
valueyoda Posted June 23, 2017 Share Posted June 23, 2017 Interesting point to sell call options. The liquidity crisis and solvency crisis has been averted, but the upside due to dilution and potential loan losses is capped. Link to comment Share on other sites More sharing options...
SharperDingaan Posted June 23, 2017 Share Posted June 23, 2017 And to think that we bought a nice sized block at just about the low ... and gave it up for just 10% :'( Tabernac !! SD Link to comment Share on other sites More sharing options...
TBW Posted June 25, 2017 Share Posted June 25, 2017 I wrote up my thoughts in greater detail on my blog. https://onbeyondinvesting.com/blogs/blog/home-capital-wtf-just-happened Still so much to consider here. Interested to hear what anyone thinks. Link to comment Share on other sites More sharing options...
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