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.