Citigroup plans synthetic convertible, exchangeable into Genworth, alongside GE divestiture

By Ronda Fears

Nashville, March 7 - Genworth Financial Inc. announced Monday that General Electric Co. is divesting another large portion of its interest in the unit, which was spun off from GE last May. Simultaneously with the secondary offering of up to 82 million shares of class A common shares to Citigroup Global Markets Inc., Citigroup intends to publicly offer a convertible exchangeable for the shares.

Timing and other details of the transactions, however, have not yet been determined, according to market sources.

In addition, Genworth said it also plans to repurchase directly from GE between $400 million and $500 million of its class B common stock at the net price GE receives in the secondary offering. The repurchase would close simultaneously with, and be contingent upon, the closing of the secondary offering.

Upon completion of these transactions, GE would own about 51% of Genworth common stock if the greenshoe is fully exercised. GE expects, subject to market conditions, to reduce its ownership over the next two years as Genworth transitions to full independence.

In May 2004, Genworth sold a $600 million mandatory convertible at par of 25 with a 6.0% dividend and 21% initial conversion premium concurrently with the initial public offering of Genworth Financial shares by GE and $100 million of series A preferred shares.

Since then, the Genworth mandatory has steadily climbed, closing up 0.34 point Monday at 34.09 in heavy volume.

The IPO priced at $19.50 per share, under the price range in the IPO filing of $21 to $23 per share as well as sweetened guidance of $20.00 to $20.50 per share, but also has risen significantly since then. Genworth shares closed Monday up 55 cents on the day, or 1.91%, at $29.30.

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