LMI provider prepares ASX launch but won’t get the proceeds

An Australian LMI business is to launch on the ASX this month but the proceeds of the deal will be poured back into the overseas parent company



Mortgage insurer Genworth Australia has filed a prospectus for its initial public offering, ahead of an ASX float on 22 May.

It plans to float the business at the indicative price range of $2.20 to $2.90 per share and a market capitalisation of $1.4bn to $1.8bn.

Genworth expects to make gross proceeds of $429m to $754m but Genworth Australia is not expected to retain any net proceeds from the offer. Instead, the proceeds will be used to repay intragroup funding arrangements with parent company Genworth Financial Group, headquartered in Virginia, United States.

Genworth Financial states that an IPO of Genworth Australia will allow it to reduce risk and rebalance capital amongst its three major mortgage insurance platforms – the US, Canada and Australia.

The total number of shares to be issued under the offer is 195 to 260 million. The total shares to be issued under the offer as a percentage of total shares on issue at completion of the offer is 30% to 40%.

The total number of shares on issue at the completion of the offer is 650 million.

 Earlier this month a Genworth Financial shareholder brought a class action lawsuit in Americaalleging senior executives misled investors about the outlook for the IPO of its Australian mortgage unit.

The class action complaint, filed by the City of Hialeah Employees' Retirement System on 4 April in the district court for the Southern District of New York, alleges the defendants – Genworth Financial, its former CEO Michael Fraizer (who resigned in May 2012) and CFO and executive vice-president Martin Klein – disseminated false and misleading statements to the investing public.

This included allegedly misleading investors as to the stability and outlook of the company’s Australian mortgage insurance unit and the company’s ability to complete an IPO of its Australian business unit in the second quarter of 2012.


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