Great-West Lifeco mum on potential share issuance

TORONTO (Reuters) - Great-West Lifeco Inc (GWO.TO) is keeping the market guessing about a possible equity issue, as executives said on Friday that the insurance company is still pondering the sale of new shares to help pay for its acquisition of U.S. mutual fund company Putnam Investments.

Ray McFeetors, president and chief executive of Great-West, repeated on a conference call that the company could "potentially" finance the completed $3.9 billion Putnam purchase by issuing new shares, but gave no indication when a decision might come.

Great-West, Canada's second-biggest life insurance company, said in February that it would buy Putnam from U.S. insurance broker Marsh & McLennan Cos Inc (MMC.N), and the deal closed on August 3.

When the transaction was announced, Great-West said it expected to finance the acquisition with a combination of debt, internal resources, and up to C$1.2 billion ($1.3 billion) in new equity, but it has not yet issued any new shares.

"At the appropriate time we will permanently finance it one way or another," McFeetors told analysts on the call.

Great-West issued C$1 billion in long-term debentures in June, has obtained a term loan and a one-year bridge loan, and also plans to issue hybrid debt securities backed by tax savings once credit market conditions improve.

With the closure of the Putnam deal, Great-West's debt-to-capital ratio has soared to 50 percent, from 18 percent in the second quarter this year, CreditSuisse analyst Jim Bantis pointed out in a research note.

Mario Mendonca, an analyst at Genuity Capital Markets, said that, given uncertainty with Great-West's tax securitization plans, he believes it is more probable that the company will issue the full C$1.2 billion in equity. Parent company Power Financial (PWF.TO) would likely buy more than half the issue, Mendonca wrote.

Two months' worth of Putnam fee income and expenses were included in Great-West's latest quarterly results.

McFeetors said that Boston-based Putnam was performing as expected. It will take time to improve Putnam's fund flows and investment performance, he said.

Great-West's consolidated third-quarter profit slipped because of a C$97 million provision for certain Canadian retirement plans, it said on Thursday. Net income was C$461 million or 51.6 Canadian cents a share in the third quarter, compared with profit of C$477 million or 53.7 Canadian cents a share a year earlier. Excluding the provision, net income climbed 17 percent.

"On balance, the results look positive and it is encouraging to see Putnam immediately accretive (to earnings)," Desjardins Securities analyst Michael Goldberg said in a research note. "The one drag is the potential equity overhang."

($1=$0.93 Canadian)