How will the full redemption of the Series G Preferred Stock affect MetLife's capital structure and credit metrics?

Impact on Capital Structure

The redemption eliminates the $1 billion‑plus of Series G preferred equity (≈1.2 million shares × $1,000) from MetLife’s balance sheet. Preferred stock sits between debt and common equity in the capital hierarchy, so its removal will shift the mix toward a higher proportion of common equity and a slightly lower leverage ratio. Assuming no other balance‑sheet moves, net debt will rise by the cash outflow needed for the redemption, but the “preferred‑equity” component of the equity base will disappear, leaving a cleaner capital structure that is easier for rating agencies to model. The net‑debt‑to‑EBITDA ratio will modestly increase (cash outlay ≈$1 bn versus FY‑2024 EBITDA of ≈$15 bn, a 0.07× bump) while the debt‑to‑capital ratio will move lower because preferred capital is no longer counted as a senior claim.

Credit‑Metric Implications

- Debt‑to‑EBITDA / Net‑Debt‑to‑EBITDA: Slight uptick due to the cash outflow, but still comfortably below the 3.0×‑4.0× thresholds that typically trigger rating watch‑lists for insurers.

- Leverage (Debt + Preferred) / Capital: Falls by roughly 1‑2 percentage points because preferred capital is stripped out, improving the “tier‑1” leverage metric used by S&P and Moody’s.

- Interest/Dividend Coverage: The 3.85 % dividend on the preferred will vanish, raising the effective coverage ratio (EBITDA / dividend cost) and freeing cash flow for other uses (share buy‑backs, dividends to common shareholders, or debt repayment).

- Liquidity: Short‑term cash balances will be reduced by the redemption amount, but MetLife’s liquidity cushion (cash & marketable securities >$5 bn) leaves ample headroom; the impact is more a matter of timing than solvency.

Trading Implications

The cleanup of preferred equity is generally viewed as a “credit‑positive” event: tighter capital structure, higher common‑ equity claim, and lower fixed‑cost obligations. If the market has not yet priced in the modest boost to credit metrics, MetLife’s stock could see a short‑term upside, especially among fixed‑income investors re‑rating the senior debt. However, watch the cash‑flow impact in the September 2025 quarter—if the redemption pressures liquidity or forces the company to tap the credit line, the stock could experience a temporary dip. A prudent trade could be a small‑to‑moderate long position in MET equity with a stop just below the recent support level, while also considering a bullish stance on the senior unsecured bonds (which may tighten spreads as credit ratios improve).