Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

Genworth Financial Inc Cl A / Equity Bottom-Up

<p><strong><em>*No Deal, Move On: </em></strong>China Oceanwide (715.HK) still does not have the money to consummate the Genworth Financial (GNW.US) [Genworth] transaction – missing its merger agreement deadline for the 17<sup>th</sup> time<sup> </sup>on December 31, 2020.  Genworth announced that while the merger agreement still remains in effect, management does “not believe a closing can occur in the near-term”; and  </p><p><strong><em>*Update Call January 5, 2021: </em></strong>Genworth is hosting a pre-market update call on January 5, 2021 which should provide more color on its contingency plans.</p>

*No Deal, Move On: China Oceanwide (715.HK) still does not have the money to consummate the Genworth Financial (GNW.US) [Genworth] transaction – missing its merger agreement deadline for the 17th time on December 31, 2020.  Genworth announced that while the merger agreement still remains in effect, management does “not believe a closing can occur in the near-term”; and  *Update Call January 5, 2021: Genworth is hosting a pre-market update call on January 5, 2021 which should provide more color on its contingency plans.

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
<p>On the 12 October,  <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration Holdings (LNK AU)</a> <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02292481-2A1255763?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a conditional, non-binding indicative proposal from a consortium comprising PEP and the Carlyle Group, by way of a Scheme. The indicative cash price was A$5.20/share, a 30% premium to last close. Perpetual, holding 9.65% of shares out, said it would vote for a firm Offer of $5.20/share and above.</p>
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<div>
<div>On the 23 October, Link <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02297758-2A1258281?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">said</a> the proposal from PEP/Carlyle "<em>materially undervalued the company</em>". </div>
<div></div>
<div>Three days later PEP/Carlyle <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02298663-2A1258716?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">tabled</a> a A$5.40/share non-binding indicative Offer, in cash. The proposal includes an option of a cash offer for Link ex-Property Exchange Australia (PEXA) of A$3.80/share, along with the ability to take an indirect interest in PEXA. Shareholders with <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02298654-2A1258715?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">14.62%</a> of shares out stated their intention to vote in favour of PEP/Carlyle's latest proposal, in the absence of a superior offer.</div>
<div></div>
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<div>
<p>PEP/Carlyle said it required six weeks of due diligence, and if DD access was not provided by the 28 October, they would walk. Link <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02300645-2A1259592?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">responded</a> that the proposal was not compelling - but gave the consortium DD access nonetheless.</p>
<h3>The New News</h3>
<p>Software provider <a href="https://www.smartkarma.com/entities/ss-c-technologies-holdings" target="_blank" data-smartkarma-citation="entities:3464:1" rel="noopener">Ss&amp;C Technologies (SSNC US)</a> has now pitched a non-binding indicative proposal, by way of Scheme, at A$5.65/share, 4.6% above PEP/Carlyle's proposal.</p>
<p>Conditions to this proposal largely mirror that of PEP/Carlyle's: confirmatory DD, obtaining debt financing, FIRB (and ACCC). And no further dividends.</p>
<p>Less than six weeks ago, Link's board said a $5.40/share Offer did not represent compelling value for Link. It is difficult to believe an offer 4.6% higher will change that view.</p>
<p>More below the fold.</p>
</div>


On the 12 October,  Link Administration Holdings (LNK AU) announced a conditional, non-binding indicative proposal from a consortium comprising PEP and the Carlyle Group, by way of a Scheme. The indicative cash price was A$5.20/share, a 30% premium to last close. Perpetual, holding 9.65% of shares out, said it would vote for a firm Offer of $5.20/share and above.


On the 23 October, Link said the proposal from PEP/Carlyle "materially undervalued the company". 

Three days later PEP/Carlyle tabled a A$5.40/share non-binding indicative Offer, in cash. The proposal includes an option of a cash offer for Link ex-Property Exchange Australia (PEXA) of A$3.80/share, along with the ability to take an indirect interest in PEXA. Shareholders with 14.62% of shares out stated their intention to vote in favour of PEP/Carlyle's latest proposal, in the absence of a superior offer.



PEP/Carlyle said it required six weeks of due diligence, and if DD access was not provided by the 28 October, they would walk. Link responded that the proposal was not compelling - but gave the consortium DD access nonetheless.
The New News
Software provider Ss&amp;C Technologies (SSNC US) has now pitched a non-binding indicative proposal, by way of Scheme, at A$5.65/share, 4.6% above PEP/Carlyle's proposal.
Conditions to this proposal largely mirror that of PEP/Carlyle's: confirmatory DD, obtaining debt financing, FIRB (and ACCC). And no further dividends.
Less than six weeks ago, Link's board said a $5.40/share Offer did not represent compelling value for Link. It is difficult to believe an offer 4.6% higher will change that view.
More below the fold.


Link Admin (LNK AU): SS&C Trumps PEP/Carlyle

<p>Back in <a href="https://www.financialstandard.com.au/news/pacific-equity-partners-to-purchase-asx-perpetual-registrars-19426" target="_blank" rel="noopener">August 2005</a>, Private Equity Partners acquired share registry outfit ASX Perpetual Registrars (APR) for ~A$132mn. PEP followed with the acquisition of Telstra's fund administrator Australian Administration Services, which was rebranded Link Administration, which subsequently acquired APR.</p>
<p>After further, substantial investments and tech upgrades, PEP IPO'ed <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration Holdings (LNK AU)</a> in October 2015 at $6.37/share, the top end of the range. PEP cleared out its holding in September 2016 at A$8.38/share. </p>
<p>Link has morphed since PEP's exit, significantly growing its domestic and global operations, via the acquisition of UK-based Capital Asset Services in <a href="https://www.linkgroup.com/media/Link-Group-CAPITA-ASSET-SERVICES-Acquisition-web-release.pdf" target="_blank" rel="noopener">2017</a> (for A$1.493bn); the Property Exchange Australia (known as PEXA), Australia's first digital property settlement platform, acquired by a Link-led consortium (alongside CBA and Morgan Stanley) in 2018 for <a href="https://www.computerworld.com/article/3469078/cba-link-group-and-morgan-stanley-snap-up-pexa.html" target="_blank" rel="noopener">$1.6bn</a>, which increased Link's shareholding to 44.2% from 19.8%; and the acquisition of Pepper Group's European loan servicing, advisory, and asset management business for A$266mn in January this year.</p>
<h3>The New News</h3>
<p>Link has announced its has received a conditional, non-binding indicative proposal from a consortium comprising PEP and the Carlyle Group, by way of a Scheme. The indicative cash price is A$5.20/share, a 30% premium to last close.</p>
<p>Perpetual, holding 9.65% of shares out, said it would vote for a firm Offer of $5.20/share and above.</p>
<p>This is a non-binding proposal and there is no guarantee a firm offer will unfold. </p>
<p>But this is a business with which PEP is well acquainted, having orchestrated and developed Link's initial business 15 years ago.</p>
<p>As always, more below the fold.</p>

Back in August 2005, Private Equity Partners acquired share registry outfit ASX Perpetual Registrars (APR) for ~A$132mn. PEP followed with the acquisition of Telstra's fund administrator Australian Administration Services, which was rebranded Link Administration, which subsequently acquired APR.
After further, substantial investments and tech upgrades, PEP IPO'ed Link Administration Holdings (LNK AU) in October 2015 at $6.37/share, the top end of the range. PEP cleared out its holding in September 2016 at A$8.38/share. 
Link has morphed since PEP's exit, significantly growing its domestic and global operations, via the acquisition of UK-based Capital Asset Services in 2017 (for A$1.493bn); the Property Exchange Australia (known as PEXA), Australia's first digital property settlement platform, acquired by a Link-led consortium (alongside CBA and Morgan Stanley) in 2018 for $1.6bn, which increased Link's shareholding to 44.2% from 19.8%; and the acquisition of Pepper Group's European loan servicing, advisory, and asset management business for A$266mn in January this year.
The New News
Link has announced its has received a conditional, non-binding indicative proposal from a consortium comprising PEP and the Carlyle Group, by way of a Scheme. The indicative cash price is A$5.20/share, a 30% premium to last close.
Perpetual, holding 9.65% of shares out, said it would vote for a firm Offer of $5.20/share and above.
This is a non-binding proposal and there is no guarantee a firm offer will unfold. 
But this is a business with which PEP is well acquainted, having orchestrated and developed Link's initial business 15 years ago.
As always, more below the fold.

Thematic (Sector/Industry)

<p><em><strong>* Mortgage Servicers:</strong></em>The mortgage servicer of a scheduled remittance must remit funds to the Government Sponsored Entity (GSE) when they are scheduled to be paid rather than when actually collected. In the case where there is a payment shortfall, the mortgage servicer must advance its own funds to cover the delinquent mortgage even if the funds are collected.  </p><p><em><strong>* Mortgage Insurers:</strong></em>Insurance is only partly overs the default after the loan becomes delinquent for 90 days. In other words, the mortgage servicer would still need to front the cash shortfall of each mortgage within the Fannie Mae and Freddie Mac pool. Another factor to consider is this thin capitalization of the mortgage insurers where their credit guarantee may not be worth the paper that its written on.</p>

* Mortgage Servicers:The mortgage servicer of a scheduled remittance must remit funds to the Government Sponsored Entity (GSE) when they are scheduled to be paid rather than when actually collected. In the case where there is a payment shortfall, the mortgage servicer must advance its own funds to cover the delinquent mortgage even if the funds are collected.  * Mortgage Insurers:Insurance is only partly overs the default after the loan becomes delinquent for 90 days. In other words, the mortgage servicer would still need to front the cash shortfall of each mortgage within the Fannie Mae and Freddie Mac pool. Another factor to consider is this thin capitalization of the mortgage insurers where their credit guarantee may not be worth the paper that its written on.

<ul>
<li>
<strong><em>Deal Update:</em></strong> Genworth Financial (GNW.US) [Genworth] announced that it and merger partner, China Oceanwide (715.HK), have entered into an extension of the merger deadline for the deal from March 31 to June 30 - the 14th waiver. There now appears to be some uncertainty in the disclosure that the required loan extension had not yet been secured by China Oceanwide is a bit disconcerting after all of this time and especially during the current environment;</li>
<li>
<em><strong>Virginia Approval: </strong></em>In addition, Genworth also announced that the Commonwealth of Virginia’s insurance regulator had re-approved the merger - a requirement by the state that arose after Genworth infused USD 100 mn into Genworth Life Insurance Company of New York (GLICNY); and</li>
<li>
<em><strong>Material Adverse Condition?:</strong></em> Mortgage firms are bracing for a wave of missed payments as many mortgage holders have lost their jobs. Genworth mortgage insurance in the US essentially guarantees mortgage payments for those mortgagees who cannot come up with a 20% downpayment. If homeowners miss payments, Genworth is contractually obligated to continue forwarding on monies to the mortgage owners. As such, Genworth (and its Canadian and Australian subsidiaries) will have to come up of billions of USD on short notice to cover their financial obligations without access to Federal Reserve emergency lending facilities. China Oceanwide may finally walk away from this deal once and for all by invoking the material adverse condition clause.   </li>
</ul>



Deal Update: Genworth Financial (GNW.US) [Genworth] announced that it and merger partner, China Oceanwide (715.HK), have entered into an extension of the merger deadline for the deal from March 31 to June 30 - the 14th waiver. There now appears to be some uncertainty in the disclosure that the required loan extension had not yet been secured by China Oceanwide is a bit disconcerting after all of this time and especially during the current environment;

Virginia Approval: In addition, Genworth also announced that the Commonwealth of Virginia’s insurance regulator had re-approved the merger - a requirement by the state that arose after Genworth infused USD 100 mn into Genworth Life Insurance Company of New York (GLICNY); and

Material Adverse Condition?: Mortgage firms are bracing for a wave of missed payments as many mortgage holders have lost their jobs. Genworth mortgage insurance in the US essentially guarantees mortgage payments for those mortgagees who cannot come up with a 20% downpayment. If homeowners miss payments, Genworth is contractually obligated to continue forwarding on monies to the mortgage owners. As such, Genworth (and its Canadian and Australian subsidiaries) will have to come up of billions of USD on short notice to cover their financial obligations without access to Federal Reserve emergency lending facilities. China Oceanwide may finally walk away from this deal once and for all by invoking the material adverse condition clause.   


Genworth Financial – MAC Clause Could Be Invoked

Australia

Computershare Limited operates share registries and computer bureaus which includes the administration of employee share and option plans and the provision of software that specializes in share registry, financial and stock markets. The Company also provides corporate trust services and acts as a trustee for clients' debt offerings in certain markets.

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Computershare Ltd (CPU AU)

Genworth Financial –What A Surprise…

GENWORTH FINANCIAL: China Oceanwide Simply Does Not Have The Money To Consummate This Transaction, And Genworth Needs To Move On - But It Wont Be...

Thomas J. Monaco

Link Admin (LNK AU): SS&C Trumps PEP/Carlyle

This remains a non-binding situation, albeit a competitive one. I'd play the spread, and pay at SS&C Technologie's terms.

David Blennerhassett

Link Admin/PEP: All Together Now. Again

Four years after exiting a company it built from scratch, PEP returns with an indicative proposal to take private the largest provider of...

David Blennerhassett

Another American Mortgage Tsunami Coming

* Mortgage Servicers:The mortgage servicer of a scheduled remittance must remit funds to the Government Sponsored Entity (GSE) when they are...

Thomas J. Monaco

Genworth Financial – MAC Clause Could Be Invoked

Deal Update: Genworth Financial (GNW.US) [Genworth] announced that it and merger partner, China Oceanwide (715.HK), have entered into an...

Thomas J. Monaco

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