PrefBlog

Manulife Financial has announced:

a Canadian public offering of Non-cumulative Rate Reset Class 1 Shares Series 7 (“Series 7 Preferred Shares”). Manulife will issue 10 million Series 7 Preferred Shares priced at $25 per share to raise gross proceeds of $250 million. The offering will be underwritten by a syndicate of investment dealers co-led by Scotia Capital Inc., RBC Capital Markets and TD Securities and is anticipated to qualify as Tier 1 capital for Manulife. The expected closing date for the offering is February 22, 2012. Manulife intends to file a prospectus supplement to its September 3, 2010 base shelf prospectus in respect of this issue.

“Our capital raising activity takes into account our expected refinancing requirements and recognizes that, while our capital position remains strong, there could be pressure on our common share price and bond spreads if our capital ratios decline. We see this action as prudent when faced with uncertain market and economic conditions.” said Donald Guloien, President and CEO of Manulife.

Holders of the Series 7 Preferred Shares will be entitled to receive a non-cumulative quarterly fixed dividend yielding 4.60% annually, as and when declared by the Board of Directors of Manulife, for the initial period ending March 19, 2017. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 3.13%.

Holders of Series 7 Preferred Shares will have the right, at their option, to convert their shares into Non-cumulative Rate Reset Class 1 Shares Series 8 (“Series 8 Preferred Shares”), subject to certain conditions, on March 19, 2017 and on March 19 every five years thereafter. Holders of the Series 8 Preferred Shares will be entitled to receive non-cumulative quarterly floating dividends, as and when declared by the Board of Directors of Manulife, at a rate equal to the three-month Government of Canada Treasury Bill yield plus 3.13%.

The net proceeds from the offering will be utilized for general corporate purposes, which may include investments in subsidiaries.

Manulife’s Canadian life insurance company subsidiary, The Manufacturers Life Insurance Company, also intends to issue $500 million principal amount of fixed/floating subordinated debentures. The debentures will be fully and unconditionally guaranteed on a subordinated basis by Manulife.

I am fascinated by the rationale for the issue: “Our capital raising activity takes into account our expected refinancing requirements and recognizes that, while our capital position remains strong, there could be pressure on our common share price and bond spreads if our capital ratios decline. We see this action as prudent when faced with uncertain market and economic conditions.” said Donald Guloien, President and CEO of Manulife.

That seems like an incredibly defensive thing to say and to put into the official press release.

Update: Rating affirmed in the DBRS comment on year-end.

Update: Fitch rates the Series 5 prefs BBB.

This entry was posted on Tuesday, February 14th, 2012 at 12:49 pm and is filed under New Issues. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.