Springleaf pays interest to subordinated holders post-trigger event

By Jennifer Chiou

New York, March 19 - Following a mandatory trigger event under Springleaf Finance Corp.'s hybrid debt, Springleaf received from Springleaf Finance, Inc. the non-debt capital funding necessary to satisfy and pay the January interest payments required by Springleaf Corp.'s hybrid debt, according to a 10-K filing with the Securities and Exchange Commission.

The hybrid debt is comprised of capital securities classified as debt for accounting purposes, but which have equity capital treatment in the calculation of effective leverage by rating agencies, the filing stated.

When a trigger event occurs under the hybrids, Springleaf Corp. is required to defer interest payments to holders of its junior subordinated debt - and refrain from making dividend payments to Springleaf Inc. - unless Springleaf Corp. obtains non-debt capital funding in an amount equal to all accrued interest on the hybrid debt payable on the next interest payment date and pays that amount to the junior subordinated debt holders.

The 10-K stated that a mandatory trigger event occurs if Springleaf Corp.'s tangible equity to tangible managed assets is less than 5.5% or average fixed-charge ratio is not more than 1.1x for the trailing four quarters.

The mandatory trigger event occurred under Springleaf Corp.'s hybrid debt due to the average fixed-charge ratio being less than 0.76x.

Evansville, Ind.-based Springleaf Finance - formerly known as American General Finance - originates and services real estate mortgages and offers loans for automobiles and other goods.

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