Manulife Financial Offers Debentures Worth C$750 Million
Zacks Investment Research | Aug 15, 2017 09:48PM ET
Manulife Financial Corporation (NYSE:MFC) has offered $588.5 million (C$750 million) of 3.049% fixed or floating subordinated debentures that are scheduled to mature on Aug 20, 2029. The offering is anticipated to be completed by Aug 18, 2017.
The debentures will bear a fixed interest rate of 3.0% till Aug 20, 2024 and thereafter a rate of 1.1% for the three months at Canadian dollar offer rate.
Manulife Financial might redeem the debentures wholly or partly on or after Aug 20, 2024 at par value along with accrued interest till the date of redemption.
The company plans to use the proceeds for redemption of Manulife’s 7.8% medium term notes, scheduled to mature on Oct 6, 2017 and due on Apr 8, 2019. The remaining part of the proceeds will be used for general corporate purposes.
Though interest rates have been raised thrice by Fed since December 2016, it is still at very low levels. The company is trying to reduce its interest burden by raising debt in a low interest rate environment. This will lead to a relatively low interest charge, thereby facilitating margin expansion.
Also, the company’s strong capital position will enable it to service its debt uninterruptedly and therefore maintain its creditworthiness.
As of Jun 30, 2017, the company had long-term debt of $4.3 billion (C$5.5 billion), up 3.6% year over year.
The debt-to-equity ratio was 12.8% as of Jun 30, 2017 compared with 12.9% as of Jun 30, 2016. Following the issuance of these debentures, debt to equity ratio will increase to 14.6%, which represents a 198 basis points increase.
Zacks Rank and Share Price Movement
Manulife Financial carries a Zacks Rank #2 (Buy). Shares of Manulife Financial Corporation have outperformed the Original post
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