MetLife Inc. bondholders could soon have authority to prevent the insurer from repurchasing shares or paying a dividend on common stock. And the company is offering them an extra payment to forfeit that right.
Holders of more than $3 billion in securities are being offered $2.50 for every $1,000 in principal, the New York-based insurer said Thursday in a statement. The company needs owners of a majority of those assets to consent, and has also scheduled a special shareholders meeting to approve changes to so-called dividend payment tests.
Chief Executive Officer Steve Kandarian has been working to simplify the insurer and last week spun off a U.S. retail unit called Brighthouse Financial Inc. That move contributed to a decline in stockholders’ equity. The drop could trigger the restrictions if MetLife posts a loss in a four-quarter period under generally accepted accounting principles.
The insurer was unprofitable in the three months ended Dec. 31. And an aggregate loss over a 12-month period is possible, depending on how fluctuations in financial markets impact the value of derivatives, analysts led by John Nadel at Credit Suisse Group A.G. wrote in a note in March.
“However, we think the scenario where MET suspends buybacks and dividends is unlikely,” the analysts wrote. “We think it should be possible for MET to adjust language in the equity provisions.”
The expiration for the consent solicitation is Aug. 18, and it applies to holders of securities including the $1.25 billion of 6.4% junior subordinated debentures due in 2066, according to the statement. The shareholders meeting was set for Oct. 19.
As a result of the Brighthouse transaction, “MetLife’s preferred stock and junior subordinated debentures could restrict ongoing dividend payments and share repurchases unless we amend those securities,” John Calagna, a spokesman for MetLife, said in a statement. “If the proposed amendments are adopted, we can avoid those restrictions and could continue to return capital to shareholders.”
MetLife slipped 45 cents to $47.86 at 9:30 a.m. in New York, erasing the insurer’s gain this year. Charlotte, North Carolina-based Brighthouse slipped 22 cents to $56.50.
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