The chief executive of the Healthcare of Ontario Pension Plan says its emergency $2-billion loan to Home Capital Group during the depths of the lender’s liquidity crisis became a “win-win” for both entities.
“It’s actually worked out extremely well for us. The return was very high over a very short period of time. We had good security for the loan the whole way through, so regardless of Home Capital’s fate we would’ve done fine given the assets we had collateralizing that loan,” Jim Keohane told BNN in an interview on Monday.
Home Capital shocked the market when it revealed the credit line’s terms in late April.
The loan, which was later revealed to be provided by HOOPP, came with a $100-million upfront fee, standby fee of 2.5 per cent on unused funds and an interest rate on outstanding balances of 10 per cent.
Home Capital ended up repaying and replacing the credit facility in June with a new one from Berkshire Hathaway with terms that were slightly less burdensome.
Keohane, who resigned from Home Capital’s board the same day HOOPP’s credit line was announced, says the deal paid off for the pension fund and the alternative lender, which was facing a run on its deposits when it secured the emergency credit line.
“We ended up with a good return on the investment and it allowed Home Capital to get through their liquidity crisis, so it was really a win-win type transaction,” Keohane said. “So it has worked out well for us and I think it’s worked out well for Home Capital as well.”