On Monday, Genworth Financial Inc. (GNW) publicly offered senior notes worth $400 million, having an annual interest rate of 7.7% with maturity scheduled on June 15, 2020. The public offering is expected to close on June 24, 2010.
Standard & Poor’s Ratings Services (S&P) has issued a “BBB” rating for senior notes while Moody’s Investor Service assigned a “Baa3″ rating to the same.
Genworth expects net proceeds of $200 million from this offering. The company primarily intends to utilize the net proceeds to pay back $100 million of outstanding borrowings under each of its five-year revolving credit facilities. The remaining amount will be utilized for general corporate purposes.
Total borrowings of Genworth at the end of the first quarter of 2010 were $4.6 billion. Assumption of the new debt increases the interest burden of the company. However, Genworth’s debt capitalization ratio of 20.6% is much lower than its nearest peers; MetLife Inc. (MET) having a debt capitalization ratio of 35.8% and Prudential Financial Inc. (PRU) with a debt capitalization ratio 44.03%.
Additionally, Genworth remains well positioned to service debt. The cash and cash equivalent balance at the end of the first-quarter 2010 was strong at $3.5 billion and cash from operations totaled $130 million.
Genworth’s capital bolstering initiatives, introduction of high-margin products, distribution expansion, improved pricing and strict underwriting standards will bode well going forward. However, we expect unemployment rates to remain elevated in the near term, which will further weigh on its mortgage insurance business.
Read the full analyst report on “GNW”
Read the full analyst report on “MET”
Read the full analyst report on “PRU”
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