Genworth sells A$488m stake in Australian mortgage insurance unit to boost liquidity
US-based insurance holding Genworth Financial is selling its entire stake worth approximately A$488.6 million in Genworth Mortgage Insurance Australia as the company looks to improve its liquidity position ahead of planned IPO and AXA liabilities settlement due in 2021 and 2022.
The company's wholly owned subsidiaries Genworth Financial International Holdings, and Genworth Holdings will sell, through an underwritten agreement, approximately 214.3 million shares in Genworth Australia at a price of A$2.28 per share. This represents Genworth's entire ownership position in Genworth Australia.
The settlement of the sale will occur on March 3, it said.
"We're pleased to take this additional step in our revised strategic plan," said Tom McInerney, president and chief executive of Genworth. "This transaction will help enhance our holding company liquidity ahead of our near-term obligations, including our debt due in September 2021 and upcoming AXA liabilities due in 2022."
Genworth said the completion of this transaction will result in a payment of approximately $247 million under our outstanding AXA promissory note, pursuant to its terms as amended by the parties in connection with this transaction.
Following this payment, the net proceeds available to Genworth will be approximately $123 million.
Earlier in July 2020, Genworth reached an agreement with re/insurer AXA to settle the dispute relating to liability for payment protection insurance (PPI) mis-selling losses following the High Court's liability judgment in December 2019.
The settlement included a payment of £100 million (approximately $125 million) to AXA by July 23, 2020, in addition to a £100 million interim cash payment Genworth made to AXA in January 2020. It also agreed to issue a secured promissory note to AXA to make deferred cash payments totaling approximately £317 million in two installments, the first on June 30, 2022 and the second on September 30, 2022; and to pay a significant portion of all future mis-selling losses incurred by AXA, to be invoiced quarterly by AXA.
Genworth stated that it will continue to prepare for a potential partial IPO of Genworth's US Mortgage Insurance business, subject to market conditions as well as the satisfaction of various conditions and approvals.
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