PrefBlog

Nothing on their website yet, but IIROC halted MFC at 4:31pm today while they announced a $2.5-billion common share deal:

Manulife Financial launched a $2.5-billion stock sale late Wednesday as the life insurer moves to build what it’s chief executive officer described as ‘fortress levels of capital.”

A syndicate of underwriters being led by Scotia Capital and RBC Dominion Securities agreed to buy $2.5-billion in Manulife (MFC-T20.180.180.90%)common shares at a price of $19 each.

They had 1,623-million shares outstanding at the end of the third quarter, so this issue of 130-million-odd shares represents a dilution of about 8%.

It is not clear just what will be done with the money – delevering the holdco would be nice – but presumably this will cause a reappraisal of credit: S&P put them on Watch-Negative on November 6.

MFC has the following preferred shares outstanding: MFC.PR.A (OpRet), MFC.PR.B & MFC.PR.C (PerpetualDiscount), MFC.PR.D & MFC.PR.E (FixedReset). All are tracked by HIMIPref™.

Update: Press Release:

The Company has granted the underwriters an over-allotment option, exercisable in whole or in part at any time up to 30 days after closing, to purchase up to an additional $375,060,000 in common shares at the same offering price. Should the over-allotment option be exercised in full, the total gross proceeds of the offering would be $2,875,460,000.

The estimated net proceeds from the offering will be approximately $2.413 billion, after deducting the underwriting fee and before the estimated offering expenses payable by the Company. The Company expects to use the net proceeds from this offering for general corporate purposes, which may include contributions of capital to its insurance and other subsidiaries, potential acquisitions or other growth initiatives. The Company has not yet made a determination as to how much of the proceeds will be invested in MLI and how much will be used for other corporate purposes. Following the offering, the Company also intends to retire the approximately $1 billion outstanding indebtedness under its Credit Facility with Canadian chartered banks using other cash resources of the Company.

Update, 2009-11-19:DBRS comments:

DBRS notes that on November 18, 2009, Manulife Financial Corporation (Manulife or the Company) announced a $2.5 billion equity issue which will significantly increase the amount of available capital to its primary operating life insurance subsidiary. Manulife also intends to retire the approximately $1 billion outstanding indebtedness under its Credit Facility with banks. At the end of September 2009, there was over $1 billion in cash held at the holding company. There are no rating implications stemming from these actions.

The equity issuance is consistent with the Company’s desire to have “Fortress Capital” to support its longer term financial strength and market franchise. This capital is a cushion against potential earnings volatility associated with heightened equity and credit market exposures, which can also be deployed for growth opportunities. Adjusting for the equity issue and the retirement of the bank debt, the net new capital improves the Company’s consolidated debt ratio (including preferred shares) to 25% from a relatively high 29% at the end of September 2009, and the adjusted debt ratio is 17.2% (down from 20.7%). DBRS anticipates that growth in retained earnings at normalized levels will reduce the total debt ratio to below 25%, which is the Company’s target

This entry was posted on Wednesday, November 18th, 2009 at 6:13 pm and is filed under Issue Comments. 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.