Home Capital favours Buffett’s bid to increase company stake, despite ISS warning

• Share on Facebook
• Share on Bluesky
• Share on X
• Copy Link

“This creates strong sponsorship to withstand regulatory, policy and economic changes,” Home Capital said in a statement.

addressing the "missing middle"

Hazlett Lake, west of QEII 'Centrepoint' developments could progress in not-too-distant future

2h ago

Available for local businesses

Central Alberta First, RDP launch new Artificial Intelligence workshop series

17h ago

Former assistant principal

Kacey Oehlerking named principal of École James S. McCormick School

18h ago

“Berkshire’s involvement has received favourable press coverage and has generally been well received by our stakeholders, including depositors and borrowers.”

Last week, another proxy adviser firm, Glass Lewis endorsed the proposed Berkshire second tranche.

“We believe the additional capital provided by the private placement will provide the company with sufficient flexibility to pursue its strategy, which we believe is in the best interests of shareholders,” Glass Lewis wrote in a report to clients.

Buffett’s financial lifeline in June provided much-need funding and helped restore investor confidence in Home Capital after the company faced a run on deposits by customers in April following allegations by regulators that it misled investors.

ISS said in a report Tuesday that at the time it was announced, the second round of equity investment from Berkshire seemed the best available alternative for stabilizing Home Capital.

But since then, it added, the company has made substantial progress such as board and management renewal, Ontario Securities Commission and class action settlements, asset sales, dividend suspension, repayment of Berkshire’s line of credit, and restoration of deposit inflows to historical averages.

“On a cost-benefit analysis, the proposed Berkshire second tranche appears to offer nominal additional reputational and strategic benefits to those already established under the Berkshire first tranche, while dilution cost of the discounted second tranche is substantial,” ISS said in a statement.

“On balance, a vote against the proposed second tranche of the Berkshire equity investment is warranted.”

On Tuesday, Home Capital also announced it was continuing to rebuild its executive ranks with the hiring of a new chief financial officer who has extensive experience in Canada’s financial services industry. The company said Brad Kotush, a former CFO at Canaccord Genuity Group Inc., will join the lender as of Sept. 1.

Follow @DaveHTO on Twitter.

David Hodges, The Canadian Press