Input Capital steps back from mortgage expansion plans

(Photo courtesy Canola Council of Canada)

Up against the current canola market, “commodity streaming” firm Input Capital has put off plans to ramp up its mortgage business with canola growers.

The publicly traded Regina company in February announced a “comprehensive review of strategic alternatives to enhance shareholder value” and said it was in “an ongoing search for appropriate scalable sources of capital to fund mortgages.”

But the company said Tuesday its review has been done with “current market opportunities and trade disruptions” in mind.

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Input’s announcement didn’t specify, but canola values have been grinding lower in recent months on China’s restrictions on Canadian canola imports, and as Chicago soybeans continue under pressure from China’s ongoing tariff war with the United States.

In that context, the company said, its board finds “options for cost-effective scalable funding of the company’s mortgage stream business are not competitively available in the marketplace at this time.”

Input, in business since 2012, bills itself as a “non-operating farming company” which deals in canola, obtained from Prairie farmers by way of “multi-year streaming contracts,” including capital streams, marketing streams and, since early last year, “mortgage streams.”

As of March 31, Input’s active streaming portfolio included 400 producers, largely in Saskatchewan and Alberta. Its canola purchases generally involve up-front payments in return for agreed-upon tonnage over a specified number of years.

However, the company said in February, “we believe that mortgage streams represent the most material opportunity for the expansion of our business over the years ahead,” thus “we are focusing the bulk of our efforts around the expansion of the mortgage stream business.”

From a financial reporting perspective, the company said at that time, mortgages “offer the prospect of slightly less seasonality in deployment numbers, and almost no seasonality in financial results, helping to smooth our quarter-to-quarter results significantly as our book of mortgage streams grows.”

But the company said Tuesday its board has instead decided to “postpone further capital deployment operations” and will instead aim to boost shareholder value from Input’s “existing book of business with our existing farm clients.”

Input said its management will instead “concentrate efforts on the profitable operation of the existing book of mortgage, marketing and capital streams with the objective of maximizing book value per share.”

The review, as announced back in February, had also suggested other options would be considered to reach peak shareholder value, including a potential sale of the company; mergers, joint ventures and/or acquisitions; a “go-private” transaction; or moving into “emerging” crops such as cannabis and/or hemp. — Glacier FarmMedia Network

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