MGIC garners flexibility from notes sale; no debt maturing until 2023

By Devika Patel

Knoxville, Tenn., Nov. 5 – MGIC Investment Corp. improved its balance sheet by adding flexibility last quarter through a sale of notes, the proceeds of which were used to pay down debt.

The company now has no debt maturing until 2023.

“We opportunistically accessed the capital markets and issued $650 million of 5.25% senior notes due in 2028 with a three-year call feature,” executive vice president and chief financial officer Nathan Colson said on the company’s third quarter ended Sept. 30 earnings conference call on Thursday.

“We used a portion of the proceeds to repurchase $182.7 million par value of the [5.75%] senior notes due in 2023 and $48.1 million par value of the [9%] junior convertible debentures [due in 2063.]

“The balance of the proceeds remain at the holding company,” he said.

The company considered its options before accessing the capital markets.

“Each of our sources of capital has its own strengths and weaknesses that must be considered,” Colson said.

“We believe that a balanced approach using our own balance sheet and accessing the capital markets is important to maintaining a strong balance sheet and maximum flexibility,” he said.

The company has no debt due until 2023.

“Our next debt maturity is $242 million due in August of 2023,” Colson said.

As of Sept. 30, the holding company had approximately $871 million of cash and investments.

The principal balance on the company's senior notes was $878,838,000 as of Sept. 30, 2020, compared to $420,867,000 as of Dec. 31, 2019.

The principal balance on the company's convertible junior debentures was $208,814,000 as of Sept. 30, 2020, compared to $256,872,000 as of Dec. 31, 2019.

On Aug. 6, MGIC priced an upsized $650 million issue of eight-year senior notes (Ba1/BB+) at par to yield 5¼% in a drive-by.

The issue size increased from $550 million.

The yield printed 12.5 basis points beneath the tight end of yield talk in the 5½% area. Initial talk had the deal coming to yield in the high 5% area to 6%.

Goldman Sachs & Co. LLC was the left bookrunner. Joint bookrunners were Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC.

The Milwaukee-based mortgage insurance company earmarked a portion of the proceeds to finance its tender for any and all of $425 million of 5¾% senior notes due 2023 and a portion of its 9% convertible junior subordinated debentures due 2063, with any remaining proceeds to be used for general corporate purposes.

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