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HOMEQ Corporation Subsidiary Arranges Sale of Medium Term Notes

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  Published in Business and Finance on Thursday, June 17th 2010 at 8:00 GMT by Market Wire
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TORONTO, June 17 /CNW/ - HOMEQ Corporation (TSX: HEQ) ("HOMEQ" or the "Company") today announced that its subsidiary, CHIP Mortgage Trust ("CMT"), has arranged the sale of $125,000,000 of senior medium term notes (the "Notes"). The dealer syndicate for the sale was led by Scotia Capital Inc. and included RBC Capital Markets and TD Securities Inc. The Notes have a coupon of 4.49%, are provisionally rated AAA by DBRS Limited and have an expected final payment date of August 4, 2015. They are unconditionally guaranteed by HOMEQ. The sale is expected to close on or about June 22, 2010.

In connection with the offering of the Notes, CMT will file with the securities commissions and other similar regulatory authorities in each of the provinces of Canada a pricing supplement to the short form base shelf prospectus of CMT dated June 1, 2010. Under the prospectus, CMT may issue up to a total of $750 million of medium term notes from time to time over the 25 months following the date of the prospectus. Through its subsidiaries, HOMEQ finances its portfolio of reverse mortgages through a combination of equity, senior and subordinated medium term notes and term deposits.

CMT used $65 million of the proceeds to repurchase medium term notes with expected final payment dates in 2010, and $24 million to repurchase medium term notes with later expected final repayment dates. Previously in the quarter, CMT repurchased $12 million of senior notes and $10 million of subordinated notes. Costs associated with these debt repurchases are not expected to have a material effect on HOMEQ's results during 2010. By repurchasing existing bonds, the magnitude of maturities scheduled for the third quarter of 2010 and subsequent periods has been reduced.

"We are extremely happy with this transaction" said Gary Krikler, Senior Vice President and Chief Financial Officer. "We are experiencing strong growth in our portfolio of reverse mortgages, and as our business continues to grow we will require access to a variety of sources of capital. Medium term notes are an important source of funding for us".

The Notes have been swapped in accordance with HOMEQ's interest matching process and have an effective cost of 155 basis points over the corresponding banker's acceptance rate. Taking the new Notes into account, the Company's weighted average effective cost on its $772 million of senior medium term notes has increased from approximately 103 to 111 basis points over the corresponding bankers' acceptance rate.

Forward Looking Statements

HOMEQ Corporation from time to time makes written and verbal forward-looking statements about business objectives, operations, performance, and financial condition, including the likelihood of HOMEQ's success in developing and expanding its business. These may be included in HOMEQ's and its predecessor's annual reports, regulatory filings, reports to shareholders, press releases, presentations and other communications. These forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of HOMEQ. Actual results may differ materially from those expressed or implied by such forward-looking statements. HOMEQ does not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time.

About HOMEQ Corporation

HOMEQ's wholly owned subsidiary HomEquity Bank is Canada's only national provider of reverse mortgages to homeowners aged 60 and over, Canada's fastest growing demographic segment. HomEquity Bank originates and administers Canada's largest portfolio of reverse mortgages under the CHIP Home Income Plan brand. As of March 31, 2010, the mortgage portfolio comprised approximately 7,400 reverse mortgages with an accrued value of $905 million, secured by residential properties across Canada worth approximately $2.5 billion. HomEquity Bank has been the main underwriter of reverse mortgages in Canada since its predecessor, Canadian Home Income Plan, pioneered the concept in 1986.

The Company's shares trade on the Toronto Stock Exchange under the symbol HEQ. Additional information on HOMEQ, including annual and quarterly reports can be viewed at [ www.homeq.ca ].

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