(Reuters) - MetLife Inc (MET.N) is asking some bond investors and shareholders to approve changes that are necessary for the insurer to make interest payments as usual, and continue returning capital to common shareholders, following its recent Brighthouse Financial Inc (BHF.O) spinoff.
In separate notices on Thursday, MetLife asked holders of some $3.2 billion worth of debt to approve changes to “interest payment tests” in bond indentures and called a special meeting of shareholders to approve changes to “dividend payment tests” in the company’s charter.
Under current terms, MetLife would be barred from paying dividends on common stock or buying back shares if its equity drops by more than 10 percent and it reports a cumulative net loss over four consecutive quarters.
In divesting Brighthouse, MetLife’s total equity dropped by about 20 percent, and analysts have cautioned that it may not earn enough in the first three quarters of this year to offset the $2.1 billion net loss it reported for the fourth quarter of 2016.
Affected bondholders have until Aug. 18 to consent to MetLife’s proposed changes. The shareholder meeting is scheduled for Oct. 19.
If bondholders do not consent, MetLife said it would have to convert $700 million worth of trust securities into junior subordinated debt, sell common stock to satisfy interest payment obligations and possibly face limits on the interest it can pay. Likewise, if shareholders do not approve changes, it could restrict MetLife’s ability to pay dividends or buy back stock.
Investors and analysts have known the changes were possible since MetLife filed its annual report early in the year. It is “unlikely” that dividends and stock buybacks will end up being restricted, Credit Suisse analyst John Nadel wrote in a March report.
Reporting by Suzanne Barlyn; Editing by Lauren Tara LaCapra and Phil Berlowitz