LONDON, Ont. – Embattled alternative mortgage lender Home Capital Group (TSX:HCG) is another step closer to rebuilding after an Ontario court approved the settlement of a $29.5 million class-action lawsuit by investors.
Shareholders pulled away from the Toronto-based company earlier this year following allegations by the Ontario Securities Commission of misleading disclosure.
Monday’s class-action settlement follows a separate OSC settlement approved earlier this month, in which Home Capital and three former executives agreed they failed to tell investors quickly and completely about fraudulent activity by some mortgage brokers associated with the lender.
About $11 million of the payments being made to the OSC will go toward the $29.5-million, class-action settlement.
Each settlement had been conditional on approval of the other.
The OSC’s announcement of its allegations in April contributed to a sudden exodus of Home Capital depositors that pushed the company to borrow about $2 billion at staggeringly high interest rates in order to stay afloat.
Home Capital shares and prospects have improved since Warren Buffett’s Berkshire Hathaway announced in June that it would support the lender through an investment of $153 million, acquiring a 19.99 per cent stake in the company.
Berkshire Hathaway also agreed to invest a further $246.7 million, at $10.30 per share, which would increase its indirect stake in Home Capital to 38.4 per cent.
Shareholders will vote at a meeting on Sept. 12 on whether to accept the additional equity investment.