Genworth Arm Offers Senior Notes - Analyst Blog

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Genworth Holdings Inc., a direct subsidiary of Genworth Financial Inc. ( GNW ), has priced the offering of its $400 million senior notes.

The company is offering the notes that carry a coupon rate of 4.8% per year and are scheduled to mature in 2024. The notes are guaranteed by Genworth.

As government-sponsored and government-owned enterprises are expected to raise the required capital balance of a company for it to qualify as a mortgage insurer, Genworth intends to deploy the net proceeds to capitalize one or more of its U.S. mortgage insurance subsidiaries. Alternatively, the company may also use the net proceeds for corporate purposes.

The rating agency Moody's Investors Service of Moody's Corp. ( MCO ) assigned a senior debt rating of "Baa3" with a stable outlook to the new notes issued by Genworth.

Along with the public offering, Genworth is also focused on deleveraging its balance sheet. Recently, the company sold its wealth management business to make payments for the near-term debt maturities.

As of Sep 30, 2013, the debt-to-capital ratio for Genworth was 0.23x, which increased 200 basis points (bps) from the 2012-end level. With the current issuance of $400 million notes, the same is expected to increase by another 200 bps to 0.25x.

Though the new issuance will increase the debt level, the company remains focused to deleverage its balance sheet. The proceeds from the divesture of its wealth management business were utilized to pay down the near-term debt maturities.

The new issuance is also expected to push interest expense of Genworth higher that had inched down 1.6% year over year to $124 million in the third quarter of 2013. Nonetheless, Genworth's solid operational performance generates enough funds to service debt uninterruptedly.

Among others in the life insurance industry, in Jul 2013, American Equity Investment Life ( AEL ) offered 6.625% senior unsecured notes worth $400 million with maturity scheduled on Jul 15, 2021.

Recently in the financial sector, XLIT Ltd., a subsidiary of XL Group plc ( XL ) has priced the offering of its $600 million senior notes.  A.M. Best Co. assigned a debt rating of "bbb" with a positive outlook.

Genworth presently carries a Zacks Rank #3 (Hold).



AMER EQUITY INV (AEL): Free Stock Analysis Report

GENWORTH FINL (GNW): Free Stock Analysis Report

MOODYS CORP (MCO): Free Stock Analysis Report

XL GROUP PLC (XL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AEL , GNW , MCO , XL

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