> Warren Buffett Blog: Berkshire subsidiary invests in Home Capital of Toronto, Canada

Wednesday, June 28, 2017

Berkshire subsidiary invests in Home Capital of Toronto, Canada

A subsidiary of Berkshire Hathaway, Buffett's main company, will also also provide a new $2-billion line of credit on better terms than an expensive cash infusion provided to Home Capital by one of Ontario's large pension funds.

"We believe this represents a turning point for Home Capital as we look to restore investor and depositor confidence in the company," said Home Capital interim chief executive Bonita Then.

While the investment from Berkshire Hathaway can be seen as a vote of confidence, it is acquiring its shares in Home Capital at a significant discount from where they are trading today and with certain approvals required.

Under the agreement, it will make an initial investment of $153.2 million for 16 million Home Capital shares at a price of $9.55, representing a 19.99 per cent stake in the company, subject to approval by the TSX.

Berkshire Hathaway has also agreed to make a second investment of $246.7 million for nearly 24 million shares at a price of $10.30, which would take its stake in Home Capital to 38.4 per cent, subject to shareholder approval.

The Berkshire credit facility will charge a slightly lower interest rate than charged by the Healthcare of Ontario Pension Plan.