TORONTO, Oct. 3 /CNW/ - Home Equity Income Trust (TSX: HEQ.UN) ("HOMEQ"
or the "Trust") today announced that its subsidiary, CHIP Mortgage Trust
("CMT"), has arranged the sale of $150,000,000 of senior medium term notes and
$20,000,000 of subordinated medium term notes (the "Notes"). The dealer
syndicate for the sale was led by RBC Capital Markets and included Scotia
Capital Inc. The 2007-1 senior notes have a coupon of 5.407%, are rated AAA
and mature on November 1, 2009. The 2007-1B subordinate notes have a coupon of
6.663%, are rated BBB and mature on November 1, 2012. Each tranche is
unconditionally guaranteed by Home Equity Income Trust and is rated by
Dominion Bond Rating Service Limited. The sale is expected to close on or
before October 10, 2007.
On October 4, 2007, CMT is expected to file with the securities
commissions and other similar regulatory authorities in each of the provinces
of Canada, the fifth and sixth prospectus supplements to the Short Form Base
Shelf Prospectus ("Prospectus") filed on November 18, 2005. Under the
Prospectus, CMT may issue up to a total of $600 million of medium term notes
from time to time over the 25 months following the filing of the Prospectus.
The initial offerings under the Prospectus were for senior medium notes of
$110 million in December 2005, $105 million in February 2006 and $115 million
in October 2006. A tranche of $20 million subordinated debt was issued in July
HOMEQ, through its subsidiaries, finances its portfolio of reverse
mortgages through a combination of equity and debt including commercial paper,
senior and subordinated debt. The debt is rated by Dominion Bond Rating
Service Limited as follows; the commercial paper program R1-high and the
senior debt AAA, which are the highest possible ratings, and the subordinated
debt is rated BBB.
"We are very pleased with the level of investor interest in the Notes
issued today. The proceeds will be used to refinance $125 million of senior
debt and $15 million of subordinated debt maturing November 15, and to finance
growth in our portfolio of reverse mortgages, which exceeded $679 million at
September 30, 2007," said Gary Krikler, Senior Vice President and Chief
Financial Officer of the Trust. "Despite difficult conditions in the capital
markets since mid-August, which have resulted in a general reduction in market
liquidity, yesterday the Trust announced record quarterly mortgage
originations in the third quarter of 2007. This transaction will enable us to
continue to fund our growth."
In order to manage interest rate risk, the Trust has matched the term of
the newly issued debt with the interest resets of its mortgages using interest
rate swaps. On a swapped basis, the interest rate of the new senior notes is
77 basis points over the 1 year Bankers Acceptance rate compared to the
swapped interest rate on the maturing senior notes of 41 basis points over the
3 month Bankers Acceptance rate.
Forward Looking Statements
HOMEQ from time to time makes written and verbal forward-looking
statements about business objectives, operations, performance, and financial
condition, including, in particular, the forecast of cash distributions and
the likelihood of HOMEQ's success in developing and expanding its business.
These may be included in the Annual Reports, regulatory filings, reports to
unitholders, press releases, Trust 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 Home Equity Income Trust
Home Equity Income Trust provides unitholders with stable monthly cash
distributions from a portfolio of reverse mortgages originated by its wholly
owned subsidiary Canadian Home Income Plan Corporation ("CHIP"). HOMEQ's units
are rated SR-2 by Standard and Poor's, which assigns this rating to funds that
have "a very high level of cash distribution stability relative to other rated
Canadian income funds." As of June 30, 2007, the portfolio generating cash
returns to the Trust comprised approximately 6,560 reverse mortgages with an
accrued value of $654.6 million, secured by residential properties across
Canada worth approximately $1.8 billion. CHIP (www.chip.ca), has been the main
underwriter of reverse mortgages in Canada since pioneering the concept in
HOMEQ's units trade on the Toronto Stock Exchange under the symbol
HEQ.UN. Additional information on HOMEQ, including annual and quarterly
reports and the Trust's distribution reinvestment plan, can be viewed at
For further information:
For further information: Gary Krikler, Senior Vice President and Chief
Financial Officer, (416) 413-4679, firstname.lastname@example.org; or Scott Cameron, Vice
President, Finance, (416) 413-6605, email@example.com