Genworth asks to change terms of notes

Genworth Financial Inc. (NYSE:GNW) is trying to make its long-term care insurance (LTCI) operations easier to sell, according to a new securities filing.

The company also wants to keep any bankruptcy events or insolvency events at its LTCI business from triggering the “event of default” provisions in the indentures, or contracts, for $3.8 billion in senior notes issued by its Genworth Holdings Inc. subsidiary.

Genworth Financial, the parent company, talks about those goals in a document the company has filed with the U.S. Securities and Exchange Commission (SEC). Genworth Financial has issued the document, a solicitation of consents, in an effort to get permission from the holders of the Genworth Holdings senior notes to change the terms of the notes.

Genworth Financial announced earlier that it hopes to separate the units that write LTCI coverage from its life and annuity units.

See also: Genworth: 3 things for agents to know

In the new solicitation, Genworth Financial says it wants to exclude three LTCI issuer units — Genworth Life Insurance Company, Genworth Life Insurance Company of New York, and Brookfield Life and Annuity Insurance Company Ltd. — from the definition of “significant subsidiary” given in the Genworth Holdings note indentures.

If that change takes effect, “Bankruptcy or insolvency proceedings involving Genworth Life Insurance Company, Genworth Life Insurance Company of New York and/or Brookfield Life and Annuity Insurance Company Limited, which operate the company’s long-term care insurance business, will not constitute an event of default,” the company says in the solicitation announcement.

Genworth Financial also describes what might happen if it sold the LTCI units or other life or annuity operations. Under the terms of the proposed note indenture changes, if Genworth Financial retained control of its U.S. mortgage insurance, and if it used 80 percent of the proceeds from the LTCI transaction or other life transaction to pay off debts, the transaction would not count as a “disposition of ‘all or substantially all’ of the company’s assets” under the terms of the indentures, Genworth Financial says.

Genworth Financial is offering to pay note holders who agree to the changes for their consent. The rates range from $6.25 to $15 per $1,000 of principal. A holder who has notes due in 2018 with a principal value of $10,000, for example, could get $62.50 in consent payments. Genworth Financial appears to be offering the note holders a total of up to $49 million in consent payments, according to LifeHealthPro’s calculations.