AM Best has assigned a Long-Term Issue Credit Rating (Long-Term IR) of “bbb+” (Good) to the CAD 1.0 billion, 7.117% subordinated notes, due June 19, 2082, recently announced by Manulife Financial Corporation (MFC) (Toronto, Canada) [NYSE: MFC]. The outlook assigned to the Credit Rating (rating) is stable.
At the time of issuance of the capital notes, MFC will issue CAD 1.0 billion non-cumulative fixed rate Class 1 shares, Series 29 (Series 29 shares), which will be held by Computershare Trust Company of Canada, a trustee of Manulife LRCN Limited Recourse Trust. Interest payments are non-deferrable. In the event that payment of interest or principal is not remit when due, the recourse to each noteholder will be limited to their proportionate share of the Series 29 shares, except in limited circumstances. Interest on the notes at 7.117% will become due and will be paid in equal semiannual installments in arrears on June 19 and Dec. 19 of each year, with the first payment on Dec. 19, 2022. Starting on June 19, 2027, and on every fifth anniversary thereafter until June 19, 2077, the interest rate on the notes will be reset.
The notes will be treated as Tier 1 capital. Additionally, the proceeds will be used for corporate purposes, including investment in subsidiaries and potential future redemptions of existing securities. MFC’s leverage and interest coverage ratios are expected to remain within AM Best’s guidelines for its current rating.
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