Manulife Financial Corporation to Issue S$500 million 4.275% Subordinated Notes Due 2034

Rhea-AI Summary

Manulife Financial (MFC) announced the pricing of a S$500 million offer for 4.275% subordinated notes due June 19, 2034. This issuance qualifies as Tier 2 capital and will initially bear a fixed interest rate of 4.275%, shifting to 1.201% over the five-year SORA OIS rate from June 19, 2029. The notes can be redeemed on or after June 19, 2029 with the approval of the Superintendent of Financial Institutions (Canada). The Singapore Exchange has given in-principle approval for the listing of the notes. DBS Bank and Standard Chartered Bank (Singapore) are joint lead managers, while ANZ and HSBC Singapore Branch are co-managers. The offering closes on June 19, 2024.

Positive

• Issuance qualifies as Tier 2 capital, strengthening Manulife's capital base.
• Fixed initial interest rate of 4.275% provides a predictable return for investors.
• In-principle approval from the Singapore Exchange for listing adds credibility and transparency.
• Ability to redeem notes early from June 19, 2029 adds financial flexibility.
• Engagement of reputable financial institutions like DBS Bank and Standard Chartered as joint lead managers enhances market confidence.

Negative

• Subordinated notes rank below other debt in terms of repayment priority, posing higher risk for investors.
• Interest rate shift to 1.201% over 5-year SORA OIS rate after June 19, 2029 introduces variable returns.
• Notes not registered under the U.S. Securities Act, limiting investor base.
• Offering not available to U.S. and Canadian residents, reducing market reach.

Insights

Financial Analyst

Manulife Financial Corporation's issuance of S$500 million subordinated notes at a 4.275% fixed rate represents a strategic move to strengthen its Tier 2 capital. This type of capital enhances the company's financial stability and ability to absorb losses, which is critical for a financial institution's health.

Key details: The fixed interest rate of 4.275% will remain until 2029, after which it will adjust based on the five-year SORA OIS rate plus 1.201%. This structure balances predictable short-term costs with potential long-term adjustments to the prevailing market rates. Investors should note that subordinated debt ranks below other debts in terms of repayment priority, which poses a higher risk but often offers higher returns.

Short-term implications: The immediate infusion of S$500 million will improve Manulife's liquidity and capital adequacy. For investors, the fixed interest rate until 2029 provides a clear yield, making the Notes appealing for those seeking stable returns.

Long-term outlook: The potential adjustment to the SORA OIS rate in 2029 introduces interest rate risk. If market rates rise significantly, the yield could become more favorable for investors, but this also implies higher costs for Manulife. Additionally, the ability to redeem the Notes starting in 2029 offers Manulife flexibility in managing its debt obligations.

It's important to pay attention to how interest rates evolve over the next few years, as this will impact the attractiveness of the Notes post-2029. Monitoring Manulife's overall financial health and regulatory changes will also be crucial.

Market Research Analyst

The issuance of these subordinated notes in the Singapore market indicates Manulife's strategic positioning within Asia, a region of considerable economic growth. By leveraging the SGX-ST for listing, Manulife taps into a dynamic financial market, potentially attracting a diverse investor base.

The choice of Singapore for this issuance is significant. Singapore's financial market is known for its stability and regulatory framework, which can bolster investor confidence. The involvement of prominent banks like DBS and Standard Chartered as joint lead managers further underscores the credibility and expected demand for the Notes.

From an investor's perspective, the Notes' listing on the SGX-ST means greater liquidity and ease of trading. Furthermore, the strategic timing of the issuance amidst evolving global financial landscapes suggests Manulife's agility in capitalizing on favorable market conditions.

In summary, this move reflects Manulife's proactive approach to capital management and its intent to solidify its presence in the Asia-Pacific region. Investors should consider the geographical and strategic implications of this issuance, as it may signal broader growth strategies by the company.

TSX/NYSE/PSE: MFC     SEHK: 945

TORONTO, June 11, 2024 /PRNewswire/ - Manulife Financial Corporation ("Manulife") announced today that it has priced an offering in Singapore of S$500 million principal amount of 4.275% subordinated notes due June 19, 2034 (the "Notes"). The offering will be made pursuant to an offering circular dated June 11, 2024 and will qualify as Tier 2 capital for Manulife.

The Notes will bear interest at a fixed rate of 4.275% until June 19, 2029 and thereafter at a rate of 1.201% over the then-prevailing five-year SORA OIS rate. The Notes mature on June 19, 2034.

Manulife may, with the prior approval of the Superintendent of Financial Institutions (Canada), redeem the Notes in whole, but not in part, on June 19, 2029 and on any interest payment date thereafter at a redemption price equal to par, together with accrued and unpaid interest to, but excluding, the date fixed for redemption. The Notes will constitute subordinated indebtedness, ranking equally and rateably with all other subordinated indebtedness of Manulife from time to time issued and outstanding (other than subordinated indebtedness which has been further subordinated in accordance with its terms). 

Approval in-principle has been received from the Singapore Exchange Securities Trading Limited (the "SGX-ST") for the listing and quotation of the Notes on the Official List of the SGX-ST. The SGX-ST takes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained in this press release. Admission of the Notes to the Official List of the SGX-ST and quotation of the Notes on the SGX-ST are not to be taken as an indication of the merits of Manulife and its subsidiaries or the merits of the Notes.

DBS Bank Ltd. and Standard Chartered Bank (Singapore) Limited, have been appointed as joint lead managers and bookrunners for the offering. Australia and New Zealand Banking Group Limited and The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch have been appointed as co-managers for the offering.

The offering is expected to close on June 19, 2024.

The Notes 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 or other jurisdiction and may not be offered or sold within the United States, or to, or for the account or benefit of, "U.S. persons" (as defined in Regulation S under the Securities Act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state or local securities law. The offering will be made solely to non-U.S. persons in offshore transactions pursuant to Regulation S under the Securities Act. This press release does not constitute an offer to sell or a solicitation to buy securities in the United States or any other jurisdiction where it is unlawful to do so.

The Notes will not be offered or sold, directly or indirectly, in Canada or to any resident of Canada.

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 the interest rate on Manulife's new subordinated notes due 2034?

The notes will bear a fixed interest rate of 4.275% until June 19, 2029, and thereafter at 1.201% over the five-year SORA OIS rate.

When will Manulife's S$500 million subordinated notes mature?

The notes will mature on June 19, 2034.

Can Manulife redeem the S$500 million subordinated notes early?

Yes, with prior approval, Manulife can redeem the notes on June 19, 2029, and any interest payment date thereafter.

Which financial institutions are managing Manulife's subordinated notes offering?

DBS Bank and Standard Chartered Bank (Singapore) are joint lead managers, with ANZ and HSBC Singapore Branch as co-managers.

Will Manulife's subordinated notes be listed on any exchange?

Yes, the Singapore Exchange has given in-principle approval for listing the notes.