MetLife to Sell $1.25 Billion of Seven-Year Notes (Update2)

By John Detrixhe and Andrew Frye
Bloomberg News
May 26, 2009

May 26 (Bloomberg) -- MetLife Inc., the biggest U.S. life insurer, plans to sell $1.25 billion of seven-year notes as soon as today, according to a person familiar with the transaction.

The senior unsecured debt may price to yield 375 basis points more than similar-maturity Treasuries, said the person, who declined to be identified because terms aren't set. A basis point is 0.01 percentage point.

U.S. insurers have posted $195 billion in writedowns and unrealized losses tied to the collapse of the U.S. mortgage market. MetLife Chief Financial Officer William Wheeler said May 13 the insurer may sell shares or debt to fund mergers and acquisitions after investment losses depleted capital across the industry.

"If we did an M&A transaction, and that's a big if, we would probably feel the need to raise additional capital to deal with capital holes on the target's balance sheet," Wheeler told investors at a conference organized by UBS AG in New York. The insurer raised about $2.3 billion in a stock sale in October, selling shares at $26.50.

Emily Phillips, a spokeswoman for New York-based MetLife, couldn't immediately be reached for comment on the debt sale.

The notes are likely to be rated A2 by Moody's Investors Service and A- by Standard & Poor's, the person said. Barclays Plc and UBS are underwriting the sale.

Commercial Property

U.S. life insurers face "pain" on more than $300 billion invested in mortgages tied to commercial property and multifamily homes, according to S&P.

"As the recession rolls on, we believe that there is an increasing possibility of distress for commercial real estate owners and for those that hold their mortgages," S&P analysts led by Kevin Ahern wrote in a statement May 20.

The losses, concentrated in home loans, corporate debt and derivatives, may expand into commercial mortgages as borrowers default or let loans go into foreclosure, according to S&P.

MetLife last sold 10-year notes on Feb. 11, issuing $1.03 billion of 7.717 percent bonds that priced at 100.35 cents on the dollar to yield 7.66 percent, or 490 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg.

The debt traded on May 22 at 105.5 cents on the dollar to yield 6.93 percent, or a spread of 353 basis points, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

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