Manulife announces Subordinated Debenture issue

Rhea-AI Summary

Manulife Financial Corporation (MFC) plans to issue $1.1 billion in fixed/floating subordinated debentures due 2034. The debentures will bear interest at 5.054% until 2029 and then at 1.44% over Daily Compounded CORRA. The offering is led by RBC Capital Markets, BMO Capital Markets, and CIBC Capital Markets, expected to close on February 23, 2024.

Insights

Financial Analyst

Manulife Financial Corporation's issuance of $1.1 billion in subordinated debentures is a significant move within the financial markets, reflecting both the company's capital raising strategies and the current interest rate environment. With a fixed interest rate of 5.054% until 2029, followed by a floating rate tied to the Daily Compounded CORRA, the debentures offer a mix of stability and responsiveness to market changes. This is particularly relevant given the potential for interest rate fluctuations over the next decade.

The option for early redemption post-2029 provides MFC with financial flexibility, allowing them to potentially reduce debt servicing costs if market conditions are favorable. However, investors should be aware that subordinated debt is lower in priority for repayment than other forms of debt, which could affect the risk profile of the investment.

The involvement of top-tier financial institutions in the syndicate, such as RBC, BMO and CIBC, could be seen as a vote of confidence in MFC's financial health and the quality of the debentures. Nonetheless, the exclusion of U.S. markets due to the lack of registration under the Securities Act indicates a targeted fundraising approach, focusing on Canadian and international investors who are not U.S. persons.

Market Research Analyst

Manulife's decision to raise capital through subordinated debentures is reflective of broader market trends where companies seek to lock in relatively favorable long-term interest rates amid a dynamic economic climate. The fixed-to-floating interest rate mechanism of the debentures aligns with investor demand for instruments that can hedge against interest rate risk. This move could be interpreted as Manulife's strategic positioning to ensure liquidity and support ongoing operations and investments.

The timing and size of the issue may also signal Manulife's assessment of the debt market's appetite and its own capital requirements. The use of proceeds for 'general corporate purposes' is a common phrase that often encompasses a range of activities, such as investing in subsidiaries, which could lead to future growth, or redeeming existing securities, which could improve the company's debt profile.

Moreover, the market's reception to this issuance could serve as an indicator of investor confidence in the insurance and financial services sector, as well as the creditworthiness of Manulife itself. It is essential for stakeholders to monitor the closing of the offering and the subsequent performance of these debentures in the secondary market, as it may impact Manulife's financial strategy and market perception.

Legal Expert

The legal framework surrounding the issuance of the debentures is crucial, particularly the regulatory approval required for potential redemption and the fact that the debentures are not registered in the United States. This limits the offering to non-U.S. persons and emphasizes the importance of compliance with international securities laws. The prospectus supplement to the existing base shelf prospectus will provide detailed information and it is essential for investors to understand the terms and conditions, including the subordination and ranking of the debt.

The legal stipulations that govern the offering, especially the adherence to the Securities Act of 1933 and Regulation S for non-U.S. offerings, are significant in mitigating the risk of legal non-compliance, which could result in severe penalties. Investors should be cognizant of the legal nuances of cross-border securities offerings and the implications for their investment decisions.

C$ unless otherwise stated                                  TSX/NYSE/PSE: MFC     SEHK: 945

TORONTO, Feb. 20, 2024 /PRNewswire/ - Manulife Financial Corporation ("MFC") announced today that it intends to issue $1.1 billion principal amount of 5.054% fixed/floating subordinated debentures due February 23, 2034 (the "Debentures"). MFC intends to file a prospectus supplement to its existing base shelf prospectus in respect of this issue.

The Debentures will bear interest at a fixed rate of 5.054% until February 23, 2029 and thereafter at a rate of 1.44% over Daily Compounded CORRA. The Debentures mature on February 23, 2034.

Subject to prior regulatory approval, MFC may redeem the Debentures, in whole or in part, on or after February 23, 2029 at a redemption price equal to par, together with accrued and unpaid interest to, but excluding, the date fixed for redemption. The Debentures will constitute subordinated indebtedness, ranking equally and rateably with all other subordinated indebtedness of MFC from time to time issued and outstanding (other than subordinated indebtedness which has been further subordinated in accordance with its terms).

The offering is being done on a best efforts agency basis by a syndicate co-led by RBC Capital Markets, BMO Capital Markets, and CIBC Capital Markets. The offering is expected to close on February 23, 2024.

MFC intends to use the net proceeds from the offering of the Debentures for general corporate purposes, including investment in subsidiaries and potential future redemptions of existing securities.

The Debentures have not been and will not be registered in the United States under the United States Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state of the United States and may not be offered, sold or delivered, directly or indirectly, in the United States or to, or for the account or benefit of, a "U.S. person" (as defined in Regulation S under the Securities Act) absent registration or an applicable exemption from such registration requirements. This press release does not constitute an offer to sell or a solicitation to buy securities in the United States and any public offering of the securities in the United States must be made by means of a prospectus.

About Manulife

Manulife Financial Corporation is a leading international financial services provider, helping people make their decisions easier and lives better. With our global headquarters in Toronto, Canada, we provide financial advice and insurance, operating as Manulife across Canada, Asia, and Europe, and primarily as John Hancock in the United States. Through Manulife Investment Management, the global brand for our Global Wealth and Asset Management segment, we serve individuals, institutions, and retirement plan members worldwide. At the end of 2023, we had more than 38,000 employees, over 98,000 agents, and thousands of distribution partners, serving over 35 million customers. We trade as 'MFC' on the Toronto, New York, and the Philippine stock exchanges, and under '945' in Hong Kong. 

Not all offerings are available in all jurisdictions. For additional information, please visit manulife.com.

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SOURCE Manulife Financial Corporation

FAQ

What is Manulife Financial Corporation's plan regarding debentures?

Manulife Financial Corporation (MFC) intends to issue $1.1 billion in fixed/floating subordinated debentures due 2034.

What will be the interest rate on the debentures until 2029?

The debentures will bear interest at a fixed rate of 5.054% until February 23, 2029.

Who is leading the offering of the debentures?

The offering is being led by RBC Capital Markets, BMO Capital Markets, and CIBC Capital Markets.

What is the expected closing date of the offering?

The offering is expected to close on February 23, 2024.

Where will the net proceeds from the offering be utilized?

MFC intends to use the net proceeds for general corporate purposes, investment in subsidiaries, and potential future redemptions of existing securities.