TORONTO — Warren Buffett's Berkshire Hathaway Inc. is reducing its stake in Home Capital Group Inc. to less than 10 per cent, the alternative mortgage lender said Wednesday.
Toronto-based Home Capital said Berkshire Hathaway's holdings will fall following the completion of a substantial issuer bid on Friday.
Buffett's investment firm acquired a nearly 20 per cent stake in Home Capital in 2017 when it stepped in to provide a $2-billion credit facility and make an equity investment in the alternative mortgage lender.
The investment, which came as Home Capital faced a partial run on its deposits following regulators' accusations that the company misled investors, helped restore confidence in the lender.
Buffett said with the full repayment of the credit line, Berkshire's investment in Home Capital is too small to justify the firm's ongoing involvement.
"The team at Home was a pleasure to deal with and have worked to thoughtfully strengthen Home over the last 18 months," Buffett said in a statement.
"Although we have decided to substantially exit from our investment, we will continue to cheer from the sidelines for our friends at Home."
Home Capital shares were down $2.46 or about 15 per cent at $14.02 in trading on the Toronto Stock Exchange following the news.
Under its 2017 deal, Berkshire Hathaway planned to make a larger investment in Home Capital, however the second tranche that would have increased its investment to 38.4 per cent was contingent on shareholder approval.
Home Capital shareholders rejected the plan, with some arguing that the additional investment would have been too dilutive and provided few additional benefits.
Company chief executive Yousry Bissada said Berkshire Hathaway's investment in Home Capital provided substantive assistance at a critical time in 2017.
"Since that time, Home Capital has returned to profitability, strengthened its business and made significant progress on its strategy for sustainable growth," Bissada said in statement.
"Home Capital is grateful to Berkshire for their support while we positioned the company for long-term success.”
Companies in this story: (TSX:HCG)
The Canadian Press
Note to readers: This is a corrected story. A previous version misspelled Warren Buffett's last name.