Essent Group Ltd. Closes $500 Million Senior Unsecured Notes Offering and $500 Million Unsecured Revolving Credit Facility

Rhea-AI Summary

Essent Group (NYSE: ESNT) has successfully closed two significant financial transactions, securing approximately $1 billion in capital. On July 1, 2024, the company finalized a public offering of $500 million in senior unsecured notes, yielding net proceeds of $495.3 million. These notes will mature on July 1, 2029, with an annual interest rate of 6.250% paid semiannually. Approximately $425 million from this offering was used to repay outstanding borrowings under a previous credit facility, with the remaining funds allocated for general corporate purposes.

Additionally, Essent Group has established a new five-year, $500 million unsecured revolving credit facility with a syndicate of banks, replacing a previous $400 million secured facility. CEO Mark Casale highlighted that these moves enhance the company's capital and liquidity position while maintaining conservative balance sheet management and the lowest debt leverage in the mortgage insurance industry.

Positive

• $1 billion in new capital secured.
• $500 million senior unsecured notes offering closed with $495.3 million net proceeds.
• Interest rate of 6.250% per annum on the notes.
• $425 million used to repay previous borrowings, improving liquidity.
• New $500 million unsecured revolving credit facility established.
• Replacement of previous $400 million secured facility.
• Enhanced financial flexibility and liquidity.

Negative

• Interest expense increase due to 6.250% annual rate on new notes.

Insights

Financial Analyst

The two transactions announced by Essent Group Ltd. significantly strengthen its capital structure. The senior unsecured notes offering raised approximately $495.3 million, which was primarily used to repay existing debt, thereby reducing the company's risk profile. The interest rate of 6.250% is relatively moderate given current market conditions, suggesting investor confidence in the company’s creditworthiness.

The new five-year revolving credit facility of $500 million replaces the previous secured facility, offering increased flexibility and potentially lower costs. The shift from secured to unsecured debt indicates a stronger balance sheet and greater trust from lenders.

It’s important to note that Essent Group maintains the lowest debt leverage in the mortgage insurance industry, a significant positive for long-term stability. Retail investors can view this as a strategic move to reduce interest expenses and increase liquidity, which may lead to enhanced shareholder value over time. However, the semiannual interest payments will impact cash flow and any increase in interest rates could affect profitability.

Market Research Analyst

From a market perspective, these financial maneuvers are poised to give Essent Group a competitive edge in the mortgage insurance industry. The access to $1 billion in capital not only enhances liquidity but also positions the company to capitalize on future market opportunities without the immediate need for additional funding. This diversification of funding sources is particularly valuable in volatile market conditions.

The revolving credit facility, now increased to $500 million, provides a buffer against market fluctuations and ensures that the company can meet its operational needs without disruption. This can lead to more consistent performance and potentially better returns for investors. However, it's also important to consider that leveraging higher amounts of unsecured debt entails a level of risk that needs to be managed carefully.

Retail investors should observe how Essent Group utilizes this newfound financial flexibility to drive growth and maintain market leadership. The company's conservative balance sheet management is a strong indicator of its ability to weather economic downturns, making it a relatively safer investment in the financial sector.

HAMILTON, Bermuda--(BUSINESS WIRE)-- Essent Group Ltd. (NYSE: ESNT) (the “Company”) announced today that it has closed upon two transactions that collectively represent access to approximately $1 billion in capital for the Company.

The Company announced that its previously disclosed public offering (the “Offering”) of $500 million aggregate principal amount of senior unsecured notes (the “Notes”) closed on July 1, 2024, resulting in approximately $495.3 million of net proceeds from the Offering. The Notes will pay interest semiannually at a rate of 6.250% per year and will mature on July 1, 2029. Approximately $425 million of the net proceeds from the Offering were used to repay all of the borrowings outstanding under the term loan portion of the Company’s prior credit facility, with the remainder available for working capital and general corporate purposes.

The Company also announced that it has entered into a five-year, $500 million unsecured revolving credit facility (the “Revolving Credit Facility”) effective July 1, 2024 with a syndicate of banks. The Revolving Credit Facility amends and replaces the Company’s previous $400 million secured revolving credit facility.

“We are very pleased with our ability to further diversify our sources of capital with access to approximately $1 billion through the recent notes offering and amended credit facility,” said Mark Casale, Chairman and Chief Executive Officer. “These actions further enhance our already strong capital and liquidity position while adding to our financial flexibility. At the same time, we continue to manage the balance sheet conservatively, and maintain the lowest debt leverage in the mortgage insurance industry.”

Forward-Looking Statements:

This press release may include “forward-looking statements” which are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," “should,” “expect,” "plan," "anticipate," "believe," “estimate,” “predict,” or "potential" or the negative thereof or variations thereon or similar terminology. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following: changes in or to Fannie Mae and Freddie Mac (the “GSEs”), whether through Federal legislation, restructurings or a shift in business practices; failure to continue to meet the mortgage insurer eligibility requirements of the GSEs; competition for customers; lenders or investors seeking alternatives to private mortgage insurance; deteriorating economic conditions (including inflation, rising interest rates and other adverse economic trends); the impact of COVID-19 and related economic conditions; an increase in the number of loans insured through Federal government mortgage insurance programs, including those offered by the Federal Housing Administration; decline in new insurance written and franchise value due to loss of a significant customer; decline in the volume of low down payment mortgage originations; the definition of "Qualified Mortgage" reducing the size of the mortgage origination market or creating incentives to use government mortgage insurance programs; the definition of "Qualified Residential Mortgage" reducing the number of low down payment loans or lenders and investors seeking alternatives to private mortgage insurance; the implementation of the Basel III Capital Accord discouraging the use of private mortgage insurance; a decrease in the length of time that insurance policies are in force; uncertainty of loss reserve estimates; our non-U.S. operations becoming subject to U.S. Federal income taxation; becoming considered a passive foreign investment company for U.S. Federal income tax purposes; and other risks and factors described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on February 16, 2024, as subsequently updated through other reports we file with the Securities and Exchange Commission. Any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

About the Company:
Essent Group Ltd. (NYSE: ESNT) is a Bermuda-based holding company (collectively with its subsidiaries, “Essent”) offering private mortgage insurance, reinsurance, and title insurance and settlement services to serve the housing finance industry. Additional information regarding Essent may be found at www.essentgroup.com.

Source: Essent Group Ltd.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240711997339/en/

Media

610.230.0556

media@essentgroup.com

Investor Relations

Philip Stefano

Vice President, Investor Relations

855-809-ESNT

ir@essentgroup.com

Source: Essent Group Ltd.

FAQ

What recent financial transactions did Essent Group (ESNT) complete?

Essent Group closed a $500 million senior unsecured notes offering and established a new $500 million unsecured revolving credit facility.

When did Essent Group close its $500 million notes offering?

Essent Group closed the $500 million senior unsecured notes offering on July 1, 2024.

What is the interest rate and maturity date of Essent Group 's recent notes?

The senior unsecured notes have an annual interest rate of 6.250%, maturing on July 1, 2029.

How will Essent Group use the proceeds from its $500 million notes offering?

Approximately $425 million will repay previous borrowings, with the remainder for working capital and general corporate purposes.

What change did Essent Group make to its credit facility?

Essent Group replaced its $400 million secured revolving credit facility with a new $500 million unsecured revolving credit facility.