Filing Overview
F&G Annuities & Life, Inc. filed a Form 8-K reporting events beginning January 12, 2024. The filing concerns the issuance of Series A Mandatory Convertible Preferred Stock to Fidelity National Financial, the company’s approximately 85% common-stock owner. The report was signed January 16, 2024.
Transaction and Key Terms
- F&G issued 5,000,000 shares of 6.875% Series A Mandatory Convertible Preferred Stock in a private placement for $250 million in cash.
- The transaction was approved by a committee of independent and disinterested directors and was exempt from Securities Act registration under Section 4(a)(2).
- Proceeds are intended to support the growth of F&G’s insurance company subsidiaries.
- The preferred stock has a $50.00 per-share liquidation preference and a cumulative annual dividend rate of 6.875%, equivalent to approximately $17.2 million annually on the issued shares if paid entirely in cash.
- Dividends, if declared, are payable quarterly beginning April 15, 2024, and may be paid in cash, common stock, or a combination, subject to specified limitations.
- Unless converted earlier, mandatory conversion is expected on January 15, 2027, into between 0.9456 and 1.1111 shares of common stock per preferred share, subject to anti-dilution adjustments. This represents an initial potential issuance of approximately 4.7 million to 5.6 million common shares.
- Holders may elect early conversion, generally at the minimum conversion rate, subject to specified adjustments. Additional rights apply upon a Fundamental Change.
- The preferred stock is not redeemable at the company’s option.
Material Changes to Securityholder Rights
- F&G filed a Certificate of Designations establishing the preferred stock’s dividend, liquidation, conversion and voting rights.
- While preferred shares remain outstanding, dividends and certain repurchases or redemptions of common stock and junior securities are restricted unless accumulated preferred dividends have been paid or reserved for payment.
- If preferred dividends are unpaid or insufficiently reserved, dividends on parity securities generally must be allocated pro rata with preferred dividends.
- Upon liquidation, preferred holders have priority over common stock and junior securities for the $50.00 liquidation preference plus accumulated and unpaid dividends, subject to payment of creditors and senior securities.
Financial Metrics, Liquidity and Outlook
The filing does not provide revenue, profit, operating cash flow, margins, debt balances, liquidity ratios or comparative-period financial results. It states that the $250 million proceeds will support growth of the insurance subsidiaries. No additional financial guidance or operating forecast is provided.
Risks and Unusual Items
- The preferred dividend is cumulative and may increase the company’s financing burden, although dividends are payable only when declared and may be paid partly or entirely in common stock subject to limitations.
- Preferred holders have priority over common stock in liquidation and dividend distributions, which may limit common-stock distributions while the preferred stock remains outstanding.
- Mandatory or early conversion could dilute existing common stockholders. The filing does not provide the final number of shares that will be issued upon conversion.
- Conversion terms may be adjusted for anti-dilution events, unpaid dividends and a Fundamental Change.
- The transaction involved the company’s controlling stockholder, Fidelity National Financial, and was approved by an independent committee.
Investor Verification Checklist
- Review the Certificate of Designations for the complete conversion-rate, voting, dividend and Fundamental Change provisions.
- Confirm how the proceeds are deployed within F&G’s insurance subsidiaries and the resulting effect on capital and liquidity.
- Monitor whether preferred dividends are declared and whether they are paid in cash, common stock or a combination.
- Assess potential common-stock dilution using the applicable market price before the expected January 15, 2027 mandatory conversion date.
- Review subsequent filings for changes in ownership, related-party matters, insurance subsidiary capital requirements and the company’s ability to fund future dividends.