NEW YORK (The Deal) -- Genworth Financial's (GNW) sale of part of its stake in its Australian mortgage insurance unit is the first of several expected moves as the life and mortgage insurer looks to reduce its debt and restructure its business.
Richmond, Va.-based Genworth will reduce its stake in Genworth Mortgage Insurance Australia Limited to 52% from 66%, raising some $225 million. The proceeds could be used either to help meet bolster the U.S. private mortgage insurance business or help fund $300 million in debt due in 2016, according to a report Monday from Jefferies analyst Colin Devine.
"The sale today represents an important step toward the execution of our strategic initiative to increase the financial flexibility and strength of Genworth. This transaction advances Genworth's ability to support compliance with the [Federal Housing Finance Agency's] Private Mortgage Insurer Eligibility Requirements and reduce debt levels," said Tom McInerney, president and CEO in a press release Monday.
Genworth has been trying to reduce its debt, possibly with an eye toward spinning off its U.S. mortgage insurance unit as a standalone entity. Hedge fund manager John Paulson had tried to push Genworth to spin out the unit last year, but management resisted and he sold his stake. Genworth management now says it is open to several possible moves to try and unlock value in its business, including the sale of individual business units and taking the company private.
Monday's announcement is the first of several steps expected over the next 12 months, including the sale of the remaining 52% Australian stake, Devine stated in his report. Genworth is also shopping its U.S. life and annuity business and a "lifestyle protection" unit principally based in Europe.