Genworth Mortgage Holdings has pursued its previously considered debt issuance to help provide liquidity.
The company has valued and completed $ 750 million senior debt maturing in 2025, yielding 6.5%. Genworth Mortgage Holdings will withhold $ 300 million of the proceeds, with the remainder being passed on to immediate parent company Genworth Holdings.
The funds going to Genworth Holdings will be used to repay or reduce outstanding debt due in order to comply with the terms of the legal settlement with AXA.
Genworth Financial – the ultimate parent of Genworth Mortgage Holdings – has $ 355 million in debt due next February and $ 660 million due in September 2021.
Fitch Ratings has assigned the company's US mortgage insurance unit a rating for the financial strength of the BBB insurer and Genworth Mortgage Holdings a standard rating for BB issuers. There was blame a BB rating offered.
In his report, Fitch pointed out that Genworth Financial has a significantly weaker credit profile than Genworth Mortgage Holdings. This business "is currently the primary source of liquidity to meet Genworth Financial's debt servicing and other funding needs.
"This risk is mitigated in part by covenants in the Senior Note Indenture that limit Genworth Mortgage Holdings' ability to borrow additional debt, pay dividends or sell assets. Fitch considers Genworth Financial property to be bad for its rating," which is why the Mortgage insurance unit rating is BBB-.
Fitch gave the mortgage insurer a stable outlook due to the possible IPO. In that case, parent company Genworth Financial would put less of a strain on its own finances and outweigh the negative effects of the coronavirus on business.
Genworth Financial has raised the prospect of an initial public offering for 19.9% of the US mortgage insurer in the event that its contract with China Oceanwide is terminated. In the last extension of the deadline, both companies have the option to withdraw from the transaction on August 31, subject to certain conditions.
In the second quarter, Genworth had the most new insurance out of the six active insurers at $ 28.4 million, just ahead of MGIC and Essent, which were in the $ 28.2 million range.
While Fitch noted that Genworth's capital cushion may be difficult to maintain under the eligibility requirements for home mortgage insurers due to a possible spike in arrears, Fitch currently expects the coronavirus pandemic to have a relatively modest impact on income [of the mortgage insurance business] and cash flow over the next two years. "
The Notes are being sold in a private offering and are not guaranteed by Genworth Financial.