8-KFinancial EventsExhibits & Filings

METLIFE INC 8-K Report, Financial Obligation (Feb 15, 2017)

Filed February 15, 2017For Securities:METMET-PEMET-PFMET-PA

Summary

MetLife, Inc. filed an 8-K on February 15, 2017, detailing a significant financial transaction involving the exchange of $750 million in Junior Subordinated Debentures for $750 million in Exchangeable Surplus Trust Securities (X-SURPS) issued by MetLife Capital Trust X. This exchange effectively converted a debt obligation into a trust security, impacting MetLife's capital structure. Additionally, the filing sheds light on the underlying assets of the trust, specifically $750 million in surplus notes issued by MetLife Insurance Company USA (MetLife USA), which is expected to become part of Brighthouse Financial, Inc. (BHF) prior to its separation from MetLife. Of particular interest to investors is MetLife's intention to terminate the trust and forgive the surplus notes obligation to MetLife USA before the BHF separation. This maneuver suggests a strategic move to simplify MetLife's balance sheet and potentially remove these obligations from the parent company's books as it prepares for the spin-off of its U.S. retail operations into Brighthouse Financial. The filing also reaffirms MetLife's commitment under a Replacement Capital Covenant, ensuring that the Junior Subordinated Debentures cannot be repaid, redeemed, or purchased before April 8, 2058, unless specific replacement capital conditions are met.

Key Highlights

  • 1MetLife exchanged $750 million of 9.250% Junior Subordinated Debentures due 2068 for an equivalent amount of 9.250% Fixed-to-Floating Rate Exchangeable Surplus Trust Securities (X-SURPS).
  • 2The X-SURPS are issued by MetLife Capital Trust X, a trust sponsored by MetLife.
  • 3The exchange effectively converts a debt instrument into a trust security, impacting MetLife's capital structure.
  • 4MetLife is the sole beneficial owner of the Trust and beneficiary of $750 million in surplus notes issued by MetLife USA.
  • 5MetLife USA is anticipated to become a subsidiary of Brighthouse Financial (BHF) before BHF's separation from MetLife.
  • 6MetLife intends to terminate the Trust and forgive the surplus notes obligation to MetLife USA prior to the BHF separation.
  • 7The filing references a Replacement Capital Covenant that restricts the repayment, redemption, or purchase of the Junior Subordinated Debentures until April 8, 2058, unless certain conditions are met.

Frequently Asked Questions

The primary purpose of this 8-K filing is to report a significant financial transaction: the exchange of $750 million in Junior Subordinated Debentures for an equivalent amount of Exchangeable Surplus Trust Securities (X-SURPS). It also details the relationship of these securities to MetLife USA and its impending separation as part of Brighthouse Financial.

This exchange converts a direct debt obligation (Junior Subordinated Debentures) into a trust security (X-SURPS). While the principal amounts are the same, the nature of the obligation and its beneficiaries are altered. MetLife also plans to forgive the surplus notes held by the trust, which would eliminate that obligation from MetLife USA's books before its separation.

MetLife USA is the issuer of the surplus notes that are the underlying asset of the trust. The filing notes that MetLife USA is expected to become part of Brighthouse Financial, Inc. (BHF) before BHF's separation from MetLife. MetLife's intention to forgive the surplus notes obligation to MetLife USA is a key event related to this upcoming separation.

A Replacement Capital Covenant is an agreement MetLife entered into in 2008. It restricts MetLife from repaying, redeeming, or purchasing its Junior Subordinated Debentures before April 8, 2058, unless it issues specific 'replacement capital' securities and meets other conditions. This covenant ensures the long-term nature of this debt-like instrument for certain senior debt holders.