Canadian banks have exposure of C$880 million to non-prime lender goeasy

By Nivedita Balu

TORONTO, April 1 (Reuters) - Canada's big six banks have an exposure of nearly C$880 million ($634.33 million) to struggling non-prime consumer lender goeasy GSY.TO, according to analysts at TD Cowen.

Goeasy, which primarily lends to Canadian consumers with weaker financial profiles, shocked market observers last month when it pulled its forecast, cut its dividend and took a charge-off due to weakness in a loanbook that focuses on financing in its auto, car and bike businesses.

Last week, the company said it had secured waivers from lenders linked to certain financial covenants for the fourth quarter.

Here are some details:

• Bank of Montreal BMO.TO, Royal Bank of Canada RY.TO and National Bank of Canada NA.TO are named lenders to goeasy, TD Cowen analyst Mario Mendonca said in a note.

• The total exposure is about C$879 million. Of that, C$177 million is a revolving loan for which the loan syndicate includes all the big six banks, C$89 million is a secured loan with another C$99 million of borrowing capacity and C$215 million of goeasy's customer loans secured as collateral. Goeasy also has a C$613 million from its Trust I warehouse facility, a funding line with a capacity of C$1.12 billion that finances loans until they are moved into a final securitization.

• The analyst said no bank has direct exposure to goeasy's underlying borrowers and all exposure is to goeasy as a firm, whose shareholders are first in line to absorb losses.

• "Taking a step back, we do not see exposure to GSY as a meaningful headwind for banks," Mendonca said in a note.

• Goeasy's shares fell 2.3% on Wednesday after it reported a bigger-than-expected loss on Tuesday.

($1 = 1.3873 Canadian dollars)