Genworth Financial Inc. is offering to pay its debt holders to accept changes in its business strategy.
Genworth is also taking other actions, such as sending new information to regulators, due to changes in efforts by China Oceanwide Holdings Group Co. Ltd. to acquire Genworth.
Genworth is a Richmond, Virginia-based company that has been a major issuer of life insurance and annuities and is still an issuer of long-term care insurance (LTCI).
China Oceanwide is a Beijing-based real estate development and financial services company.
China Oceanwide agreed to acquire Genworth for $2.7 billion in October 2016. Since then, the companies have head to push the deal completion deadline back several times due to regulatory approval delays.
Genworth has also pulled back from proposed efforts to separate Genworth Life and Annuity Insurance Company (GLAIC) — a unit that has focused on selling annuities GLIC) — from Genworth Life Insurance Company (GLIC) — a unit that has focused mainly on selling long-term care insurance, due to disagreements with regulators in Delaware about the value of GLAIC.
Genworth says one of its subsidiaries, Genworth Holdings Inc., has begun asking holders of its senior notes for their consent to change the terms of the notes.
Genworth Holdings is offering the note holders $2.50 per $1,000 in principal as a “consent fee.”
Under the current terms of the notes, Genworth can exclude a regulatory action directed at certain subsidiaries as a bankruptcy, insolvency or similar event of default, for purposes of its relationship with the note holders. Genworth now wants to put GLAIC on the list of subsidiaries for which a regulatory action would not count as a default event.
Genworth is making that change because of the decision to suspend efforts to “unstack” GLAIC from GLIC, the company says in documents filed with the U.S. Securities and Exchange Commission.
Genworth does not anticipate that GLAIC will be the target of such a regulatory action, the company says.
Genworth Holdings would pay the $2.50 consent fee only to the note holders who agree to the change, and only if the effort to make the change is successful, according to the filings.
If Genworth succeeds at making the change, the note holders who fail to provide consent would lose out on the consent fee, the company says.
Genworth Holdings is also offering to pay a fee of $2.50 per $1,000 of principal, up to $500 per individual note holder, to a retail broker, bank or trust company that helps Genworth Holdings collect that individual note holder’s consent to the new note terms.
More information about the consent solicitation is available here.
Genworth also says that it and China Oceanwide have told regulators about China Oceanwide’s new proposal for supporting Genworth’s U.S. insurance operations after China Oceanwide completes the Genworth acquisition.
The companies said in August that China Oceanwide intends to increase post-deal support to $1.5 billion, from the $1.125 billion figure included in the original deal agreement.
In the new announcement, Genworth has confirmed that China Oceanwide intends to provide $1.5 billion in post-deal support.
Genworth says it and China Oceanwide have told regulators, in supplemental filings, that they could use a different funding structure from what they originally envisioned, in case “international political and economic developments cause potential delays in implementing the original funding structure.”
In the supplemental filings, the companies also tell regulators about a plan they have developed for having an outside company manage and protect Genworth’s customer data.
Genworth and China Oceanwide would have an independent monitor oversee the companies’ compliance with customer data safeguards, and they would appoint three independent board members with national security expertise, Genworth says.
— Read Genworth Asks to Change Terms of Notes, on ThinkAdvisor.