Ontario Teachers’ Reverse-Mortgage Lender Eyes Senior Debt Sale

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PUBLIC PENSIONS FUND PRIVATE BANKS

Esteban Duarte
Wed, July 26, 2023 

(Bloomberg) -- HomeEquity Bank, Canada’s largest provider of reverse mortgages, is seeking to sell senior bonds denominated in local currency, according to Chief Financial Officer Atul Chandra.

Such an issuance would be the first of its kind for the Toronto-based firm, which has previously only tapped institutional bond markets via the Chip Mortgage Trust. The trust raised C$175 million earlier this month, according to data compiled by Bloomberg, with a five-year note priced to yield 6.069%.

“We would want to come back to the market sometime over the next few months,” Chandra said in an interview. “We would like to actually engage with the investors and open up a new channel of funding. That would be a desirable outcome.”

Chandra said the firm had yet to decide whether to next issue debt directly through the bank or via the trust.

HomeEquity Bank specializes in reverse mortgages, offering loans to Canadian homeowners who are 55 or older. Those who qualify can get a loan worth up to 55% of their home’s value and avoid regular payments until they move out or sell the property, according to the firm’s website.

The firm was bought by the Ontario Teachers’ Pension Plan Board last year.

Home prices across Canada had started to recover earlier this year when the Bank of Canada paused its aggressive interest-rate increases. Policymakers, however, have recently resumed rate hikes — a move that could keep some homebuyers on the sidelines, according to a Canadian Real Estate Association report early this month.

Chip Mortgage Trust’s issuance earlier this month was more than two times oversubscribed and received orders from 16 investors, according to Chandra. That compares to a C$125 million debt sale in 2021 that lured 17 buyers and order book of more than four times the deal size.

Chandra said HomeEquity Bank’s long-term senior debt rating is BBB(low) with a stable outlook at DBRS Morningstar. A representative for DBRS Morningstar didn’t reply to request for comment.

--With assistance from Ari Altstedter.

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