Wally - the economic impact would be about 800M minus transaction costs to the GNW holding company, which basically matches the estimates that have been in the press all along. The holding company could reduce debt by that much, which would be looked favorably upon by the ratings agencies, would reduce debt service, and would get us closer to returning capital to shareholders.
Who knows the impact on the stock price short term, but hopefully it would take us up long term, as higher ratings can only help. The best thing for the stock price will be continued US MI improvements + realization of more and more cash from the LTC rate increases. US MI should have a good quarter - Q1 is generally seasonably better than Q4, and Radian and MTG have had relatively good monthly stats. In another year the LTC money should be looking much better too.
Here's some interesting reading to bide the time - this is from the Business Spectator.
The four joint lead managers of Genworth Australia’s initial public offering are beginning their briefings today with fund managers and have sent them their valuations of the mortgage insurer.
A fund manager told Data Room the analyst at Commonwealth Bank of Australia values Genworth Australia at $1.9 billion to $2.7bn. Macquarie’s analyst values the company at $2.1bn to $2.2bn and UBS’ analyst values the mortgage insurer at $1.6bn to $2.5bn.
Goldman Sachs has estimated Genworth Australia’s valuation at $1.9bn to $2.4bn.
Today, Macquarie is hosting a lunch for analysts and fund managers to brief them on Genworth’s business. A fund manager says there will be similar briefings hosted by the three other underwriters of the IPO in the coming week.
The purpose of these briefings by the analysts working at the joint lead managers is to get feedback on the level of interest and demand for shares for the IPO. Once this feedback is received, the managers of the IPO will set the timetable of the share sale.
Fund managers have not been told how many shares Genworth Australia is seeking to sell or the price range of the IPO. The proceeds from the IPO will be used to repay intragroup funding, a US Securities and Exchange Commission filing says.
Genworth Australia’s book value is $2.2 billion, according to the SEC filing. The company’s total assets are $4 billion, the filing says.
“The mortgage origination market in Australia is expected to grow by approximately 10 per cent, resulting from estimated overall system credit growth of between 4 per cent and 6 per cent,” Genworth says in its SEC filing. “The high loan-to-value ratio loan market is assumed to be stable.”
Genworth Australia expects total residential mortgage originations in Australia to increase by about 10 per cent in the 12 months to June 30, 2014 . . .
Agreed that there is likely no merit here, but every class action plaintiff's firm out there looks to be jumping on the bandwagon and issuing a PR. Just crazy. I'm just trying to figure out why they file now v. earlier. Trying to get their piece of the IPO cash?
Hopefully GNW digs its heels in and defends this one. After all, what use is the "forward looking statements" safe harbor that accompanies every communication if the corporate statements identified in the pleading (made under the safe harbor and having the "subject to market conditions" qualifier) are the basis for liability?
not submitting a claim form for this one - just realized I didn't buy during the class window.
I always wondered if/when this would happen. Everyone on this board (including me) was livid when the company stated in the Q1 con call that year that the IPO was going forward and then decided to delay it shortly thereafter. Turns out those are the facts plead in the complaint.
Whether or not they have a case, it looks silly in light of today's stock price. Delaying the IPO was a good move in hindsight, and also gave a great opportunity to pick up more shares during the subsequent price crash.
These lawsuits only pay off big for the lawyers, but i always submit my claim form, as the shareholders sometimes get a token payout after settlement. I don't think GNW is in the wrong here, but i'll take some return in the form of a settlement check if it is offered.
Tradingadollar - i generally don't try to predict price moves driven by news (but i may have a few posts here and there where i take a stab at it - i don't remember). I personally was expecting a drop once the IPO was announced - buy the rumor, sell the news....and we've been trending up on the rumor for awhile now. That said, I do expect to continue to trend slowly upwardly once the event driven traders have had their fun. I base my expectation on continuing improvements in company performance and eventual ratings improvements. I expect the price will move 3 steps forward/2 steps backward the whole way.
i think they said that they wish to retire debt primarily. the ratings folks want them to get their leverage ratio down before they can get any upgrades, and McInerney has stated that he won't return capital to shareholders until ratings are upgraded, so this seems like a logical use of the cash.
No telling if this will get us to the next stock price level, but it's one more step forward for the company at least. This liquidity will allow them to retire some more debt, which will bring us closer to a ratings upgrade, and thus eventual return of capital to shareholders. It also helps that US MI tends to do well in q1 every year, so we likely have that positive news coming as well.
The news is in the Australian Financial Review, which i think is reputable. I checked, and the blurb on GNW is on the AFR's home page, so it looks legit. however, until the company announces, it's still officially a rumor.
Looks like there are rumors that the AU IPO will be next week. Do a google search for "genworth rings the bell" and you'll find a relevant blog post. I can't access the link to the actual article about it - subscription only...
Good news. The last time GNW hit Palmer's target (i think at $14), he downgraded, so this is a nice change. Compass Point has a $22 price target as well.
Agreed - i think leadership has a very good handle on the company. Having some momentum in the up direction sure is a nice change from the past.
I think they first plan on retiring some more debt to get the leverage ratio down to the 20-22 percent range, and then they may return some to shareholders, but they have always been noncommittal on that.
This must be at least part of the reason for the recent boost. The article is in the Business Spectator.
Genworth IPO expected: report
Australia’s biggest mortgage insurer Genworth is expected to rekindle its $800 million float, The Australian Financial Review reports.
The newspaper says market sources indicate Genworth will file prospectus documents with the corporate regulator before the end of this month.
Genworth was moving towards a float two years ago, but the plans were derailed by significant loan losses, much of which was due to the Queensland floods.
More info from last year's 10K:
Under our Tax Matters Agreement with GE, if any person or group of persons other than GE or its affiliates gains the power to direct the management and policies of our company, we could become obligated immediately to pay to GE the total present value of all remaining tax benefit payments due to GE over the full term of the agreement. The estimated present value of our fixed obligation as of December 31, 2012 and 2011 was $279 million and $310 million, respectively. Similarly, if any person or group of persons other than us or our affiliates gains effective control of one of our subsidiaries, we could become obligated to pay to GE the total present value of all such payments due to GE allocable to that subsidiary, unless the subsidiary assumes the obligation to pay these future amounts under the Tax Matters Agreement and certain conditions are met. The acceleration of payments would be subject to the approval of certain state insurance regulators, and we are obligated to use our reasonable best efforts to seek these approvals. This feature of the agreement could adversely affect a potential merger or sale of our company. It could also limit our flexibility to dispose of one or more of our subsidiaries, with adverse implications for any business strategy dependent on such dispositions.
The "GE tax matters agreement" has been a potential impediment to an acquisition, as it ups the cost of a buyout without providing any value to an acquiror, but as time goes on that becomes less and less of a factor.
Dodge&Cox apparently sold essentially all of their position (32M), but Blackrock bought that much plus some more (38M or so), FWIW.
There was a news article this morning regarding Puerto Rico obtaining 2-2.5B in private financing through RBC. I can only find a spanish version of the article. Hard to say whether it is true, given that it hasn't been widely reported.