HomeTrust On Sale (Oaken Financial) | Page 7 | Oaken Financial | Discussion forum

When a business is in trouble and thus sells some or all of its assets, or goes bankrupt because buyers can't be found in time, often other businesses pick at the carcass and make deals for whatever they want - no need to buy the whole shebang unless someone wants to. With respect to Home's GIC business, if an interested successor can't be found then CDIC steps in to make up any difference Home can't provide and the GICs terminate. But if a deal is struck such that a successor agrees to take on Home's GIC obligations then so be it, the original GIC contracts will be honoured until the GICs mature.
In any event, it's all speculation, there are various ways it can go.

Loonie, re your last point: the contract is between the GIC holder and Home, no-one else is a party to it.

But if a new FI acquires the GICs then the new FI now takes on the contract, thus takes over/replaces Home's obligations as one of the two parties to the contract, thus the GIC continues to maturity, no terms can be changed (terms to a contract cannot be unilaterally changed by one of the parties unless the original contract contains that provision). Of course at maturity either party, you or the new FI, can do whatever it likes. CDIC is not involved in this scenario.

CDIC is only involved if a new FI can't be found re the GICs and Home, on its dissolution (i.e. one party to the contract ceases to exist thus the contract ends), doesn't have enough to pay out to date of default.

Maybe a similar example can be seen when your bank sells your mortgage (this happens regularly, that bundles of mortgages are sold among FIs): from your point of view, nothing has changed, you don't even know, terms remain the same, but in fact your mortgage is now owned by another FI and you continue to make payments to your original bank who is now collecting your payments and passing them on (usually less a collection fee) to the new FI holder of your mortgage.

I don't actually disagree with Bill or AltaRed. What they are saying is what I would have said in the absence of JenE's conversation with CDIC, which spooked me a little.

So, I'll try again to summarize that part, and you can all tell me if I've got it right.
If HCG defaults completely, CDIC pays up, and that is the end of whatever deal you had on your GIC. You take your money elsewhere and get a new GIC at prevailing rates.
If another FI buys up your GIC or buys up HCG, they have to honour the terms that you signed up for until the GIC matures, so your rate is protected.

There are some great deals coming up at HCG next week.
Does anyone think there is any serious risk in accepting them, if you stay within CDIC limits? If I'm reading this correctly, the only risk I see is that you might lose your great rate if HCG defaults and CDIC pays out. However, in the meanwhile you will get the great rate. If bankruptcy happens soon, then you will have gotten a great short term rate and will be re-entering the GIC market at about the same rates as now. If it takes them a longer time to default, then you've gotten your great rate for a longer period of time but might face a lower rate when you have to find a new issuer (or you might face a higher one). This is more or less what I said a few days ago.

I'm wondering why they didn't offer these rates earlier and save themselves some of the interest they are paying now to the pension plan group, which is very high.

Top It Up said
Todays Liquidity and Deposits update from HCG

http://www.homecapital.com/pre.....202017.pdf

Both HISA and and GIC cash down from yesterday.  

Oaken savings are UP in this report.

I guess I got spooked by some of the doomsday comments re Home Capital, resulting in me not thinking clearly. Upon reflection, I remembered that when Ally was taken over by RBC and ING was acquired by Scotia, my TFSA GICs with them continued without change or interruption. I was successful in defending the no-cost transfer of TFSAs when they matured from these institutions, BUT, I had to be vigorous and vigilant in both cases, as each tried to convince me that I had to pay the transfer fee under the new ownerships.

As someone who has a considerable amount of my retirement savings deposited with Oaken, I've been watching the story unfold with great interest. I decided not to remove any money from my HISA (which is below the insurance limit) but have been placing new deposits into an HISA with a different institution (so that I'll have quick access to money if my Oaken account gets temporarily frozen for some reason).
But I have been renewing any registered GIC's that have matured; mainly because it's easier than arranging a transfer, but also because of the excellent rates being offered. This latest rate is the best yet, and I intend buying a new 5 year GIC for my TFSA on May 23rd when the new rate comes into effect.
As my RSP, TFSA and HISA are all below the insurance limit, I see it as a "no brainer" to take effect of these great rates. May as well benefit from Home's "troubles" while I have the chance, because it's a fairly "risk free" opportunity provided each individual account is below the $100,000 limit.

Loonie said
I hear what you're saying AltaRed but I can't muster the same degree of concern about viability. All businesses have "specials" from time to time, even the big banks.

Peoples Trust kept an "outsized" HISA TFSA rate for several years, from which many of us benefitted, and it doesn't seem to have done them any harm.

Last summer Oaken offered 2.75 on all GiCs 18 mo -- 5 years, which was very high especially for the shorter terms. This did not hurt them. It's only the fallout from disclosure issues that is hurting them now.

Now, Oaken is offering high rates on everything except its HISA. They have targeted the GICs as they did last summer. The average rate on these new GICs is not much higher than last summer's rate -about 10 bps. The Bank of Canada rate has not changed in the interim. 10 bsp or so does not seem to me to be extravagant in terms of risk to HCG given that they could manage 2.75 quite well last year and given their desperate need for capital at better rates than they are paying. 2.75 was a promo rate, and so is this. In other words, it won't last; but the contract will last (unless they go bankrupt). They will reduce it again as soon as they have enough in the pot and the prospect of ongoing mortgage business.

There were things about Enron that were fishy that I didn't and don't understand. But I am not sure this is a parallel situation.
To me, this looks like a situation where the bank has to offer an above-average rate, for obvious reasons. There are no secrets about their situation (at least I hope there aren't!) and the rates are not so far out of whack that it's inconceivable that HCG could continue to carry on at these rates. The new rates will be blended with the existing GICs for overall profits but profits from new mortgages will be down for a while, until the rates for depositors come down again.

This is how it looks to me. Am I missing something?  

It's similar.

Peoples Trust had a major issue/issues with Security. They paid the price for that and lost many people. They than offered a high TFSA HISA like you said. Many people came back.

https://www.thestar.com/business/personal_finance/2013/11/09/peoples_trust_warns_clients_about_security_roseman.html

This situation is a bit different. Home Trust was/is being investigated for non discloser and a mess of things involving 45 agents.

http://business.financialpost......ied-income

http://business.financialpost......er-channel

Both are horrible mistakes. Home Capital may get worse though. Mainly because they miss lead people. It's still a developing story to me.

Not all the HCG news from Bloomberg is dismal:
https://www.bloomberg.com/news/articles/2017-05-18/home-capital-garners-some-bay-street-support-in-survival-fight

There seems to be some guarded optimism creeping into the financial sector.

I found the statement that they expect 50% of their GICs to mature within a year to be interesting - assuming it's accurate, as there was no quotation. It's hard to say for sure but I suspect that means a disproportionate number of GICs are shorter rather than longer.

I'm confident that Home Capital will survive one way or another; it may be in a slightly different form, or reduced size, but I think the tide is turning and consumer confidence is beginning to rebuild.
But even if I'm wrong, providing your deposits in each individual account are below the $100,000 insured limit, people have got absolutely nothing to worry about. I've been very careful to split all my TFSA and RSP GIC's between Home Trust and Home Bank so as to maximize my insurance coverage, and everyone else should do the same. And my HISA has a $100,000 limit all of it's own. So when you look at the big picture, most folks have at least $500,000 of insurance coverage if they're careful about where they place their money.
And, as previous posters have pointed out, if the worst does happen and we wind up receiving the insurance, you will get the high interest rate agreed to right up until the date of default. Which makes for very lucrative short term rates if one were to take out a 5 year term on at 3.1% and the bank folded a few months later. So, for me, it's a "no brainer" provided I don't exceed the insurance limit in any one account.
I really don't understand what all the "hand wringing" is about.