) sold callable notes worth approximately $1.0 billion in a
two-part offering that were scheduled for remarketing and
settlement in 2012, according to Reuters.
Previously, the notes were issued as senior debentures worth
$1.0 billion, which were due to mature in 2023. The senior
debentures then comprised of 40 million common equity shares of the
company issued to AM Holdings LLC - a subsidiary of
American International Group Inc.
) - in connection with the acquisition of American Life Insurance
Co. (ALICO) from the latter.
Presently, the first set of $500 million 5-year notes is issued
at $100.5119, while it bears a coupon rate of 1.756% and yield of
1.67%. The notes are callable 50 basis points (bps) and carry a
spread of 105 bps over the Treasuries. The remarketed notes are
dated to mature on December 15, 2017.
Meanwhile, the remaining $500 million 10-year notes are issued
at $100.6334 and are slated to mature on December 15, 2022. The
notes bear a coupon rate of 3.048% and yield of 2.985%. The notes
are callable 50 basis points (bps) and carry a spread of 135 bps
over the Treasuries. Interests on both the set of notes will be
paid semi-annually, with the first pay scheduled on June 15,
JP Morgan Chase & Co.
Credit Suisse AG
Deutsche Bank AG
) as the joint book-running managers for the sale. Both the set of
the above-mentioned notes are rated "A3" and "A-" from Moody's
Investor Service of
) and Standards & Poor's (S&P), respectively.
Additionally, the net proceeds from the remarketing of the notes
will be paid to the common shareholders. Of this, $1.0 billion will
be used by these shareholders to purchase newly-issued shares from
MetLife under stock purchase contracts that consists part of the
common equity share units.
Last month, MetLife also raised $750 million from the sale of
senior unsecured notes that are scheduled to mature in February 15,
2042. The company expects to utilize the funds raised from the
issuance of these notes for business operations and to retire
senior notes worth $750 million that are due to mature in August
and November of 2013.
Further, the ratings from all the agencies validate MetLife's
solid earnings growth and escalated its operational scale on the
heels of exceptional operating performance from its diversified
business basket and brand appreciation. Moreover, efficient
management of the company's investment portfolio and enterprise
risk has helped it secure competitive advantage in the market.
Despite the lingering concerns regarding the low interest rate
and economic volatility, MetLife has been successfully maintaining
acceptable risk-based adjusted capital (RBC) ratios. Further, the
latest notes sale is not expected to hamper the financial leverage
that stood at 36% at the end of June 2012, which is still higher
given the lower capital in 2012 compared with 2011, primarily led
by alterations in DAC accounting standards this year.
Conversely, the debt leverage is expected to improve to about
24% by the end of 2013, when MetLife will have paid off the debts
that are scheduled to mature next year.
Additionally, S&P anticipates MetLife to produce net
retained earnings of about $3.9 billion and $4.2 billion in 2012
and 2013, respectively. This estimate includes the remarketing and
settlement of equity units worth $1 billion, in both 2012 and 2013.
The rating agency estimates EBITDA in the band of $9-10 billion
with EBITDA fixed-charge coverage of 6.5x to 7x, which was 7.2x at
the end of June 2012.
We retain our long-term Neutral recommendation on MetLife. The
quantitative Zacks #2 Rank (short-term Buy rating) for the company
indicates slight upward pressure on the stock over the near
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