Tuesday, June 30, 2020

COVID-19 testing problems are all too familiar to Lyme disease patients


Much like early Lyme testing, the coronavirus is a reminder that diagnostics aren’t perfect.
By Carrie Arnold June 28, 2020 Carrie Arnold is a freelance science writer from Virginia. She covers all aspects of the living world and has written for a variety of publications including Mosaic, Aeon, Scientific American, Discover, National Geographic, and Women’s Health. This story originally featured on Undark.
As a Lyme patient, Jennifer Crystal has a lifetime of experience dealing with severe illness. So when the 42-year-old writer and patient advocate came down with what appeared to be a mild case of food poisoning in early March, she cancelled her weekend ski trip to New Hampshire, but otherwise shrugged it off. However, when the dizziness gave way to a fever, and vomiting became a racking cough, Crystal began to worry.
Her illness began just as Massachusetts declared a state of emergency due to COVID-19, and because her use of public transit put her in contact with so many people each day, she couldn’t shake the feeling that she was becoming another coronavirus statistic.
Her primary care doctor advised her to get tested, which is where she, like nearly all Americans, began running into roadblocks. “I kept getting denied because I hadn’t been out of the country,” Crystal says. “It didn’t matter if you had all the symptoms.”
After several days of phone calls to health departments and the governor’s office—and as national news reports began documenting the proliferation of inaccurate or inconclusive COVID-19 tests—Crystal finally found a hospital emergency room that would test her since her immunocompromised status put her at high risk for severe disease. After taking a nasal swab, the doctor sent Crystal home to wait for the test results. When Crystal’s COVID-19 test turned up negative, her primary care physician said it was likely a false negative.
And that, Crystal says, is when the parallels to her experience getting diagnosed with Lyme disease years ago—a long journey marked by a vague menagerie of symptoms and a gauntlet of inadequate, inaccurate tests—first began sinking in.
Back in the early 2000s, when she first began looking to get tested, for example, she found that the test doctors relied on wasn’t that accurate. According to Brian Fallon, director of Columbia University’s Lyme and Tick-Borne Diseases Research Center in New York, in areas where Lyme disease is less common, doctors have to rely much more heavily on positive test results to diagnose it. That’s especially true if patients don’t have the bullseye rash— known medically as erythema migrans—characteristic of Lyme disease. Fallon also says that the US Centers for Disease Control and Prevention (CDC) didn’t always make clear that the vagaries of testing meant that their case counts were likely dramatically underestimating the burden of Lyme disease in the US.
Amid the COVID-19 pandemic, others in the Lyme community have begun recognizing some of these same similarities, too. “It was well known that only 10 percent of [Lyme] cases were actually reported to the CDC,” said Fallon. “But they needed to rely on traditional methods, which required positive blood tests or physicians’ records indicating the clinical symptom of erythema migrans. So the CDC numbers were always 10 times less than the actual rate, but the CDC wasn’t explicitly saying this.”
“The same thing is true for COVID-19,” Fallon added. “If you only report cases of people who have been tested, and the tests are not widely available, then you’re going to have a low rate.”
To Crystal, the one bright spot in the coronavirus testing debacle is that it has helped to educate the wider public on issues relating to diagnostic testing—something those in the trenches of Lyme disease when it first began to emerge decades ago had already learned.
While encouraged by the speed with which trials and vaccine development have gotten underway, Fallon noted that there’s still a long way to go. “I think we as medical students who go into medicine thinking that science is so advanced and it knows so much,” he says. “But over the last 30 years, I’ve learned that, yes, science has learned a lot, but it still needs to learn a vast amount more.”
Diagnosing Lyme disease has always been challenging. Similar to COVID-19, Lyme disease can cause a range of symptoms, such as rash, fatigue, joint pain, facial paralysis, heart problems, dizziness, and more.
“These symptoms are subjective and nonspecific,” says Timothy Sellati, chief scientific officer at the Global Lyme Alliance, a nonprofit Lyme disease research group for whom Crystal writes a weekly column, “and so it makes it very, very challenging for a physician to do a differential diagnosis and make certain that this individual has Lyme disease and not chronic fatigue syndrome, not multiple sclerosis, not ALS, and not influenza.”
It was well known that only 10 percent of [Lyme] cases were actually reported to the CDC. - Brian Fallon, director of Columbia University’s Lyme and Tick-Borne Diseases Research Center
As a result, physicians have had to rely even more than usual on laboratory-based tests to diagnose Lyme disease. On October 28, 1994, a group of scientists gathered at the Hyatt Regency in Dearborn, Michigan, for the Second National Conference on Serologic Diagnosis of Lyme Disease. Their goal was to hash out a standard testing strategy for Lyme disease.
Ever since Lyme disease was identified in 1982 as a bacterial infection caused by Borrelia burgdorferi and spread by Ixodes ticks in the US, researchers had struggled to develop a laboratory test to help diagnose the condition. Historically, microbiologists had directly cultured disease-causing bacteria, but that didn’t work for Lyme. For one, B. burgdorferi is nearly impossible to grow in the lab. And even if it did readily grow in culture, the bacterium itself is only present in blood transiently, and in low numbers, so getting a sample would be problematic. That meant that directly identifying the Lyme disease-causing pathogen would be difficult. So researchers instead began looking at indirect ways of identifying Borrelia, such as searching for antibodies produced by the immune system against the bacterium.
The enzyme-linked immunosorbent assay (ELISA) detects antibodies produced against specific pieces of protein from Borrelia, known as antigens. ELISA tests are fairly sensitive, which means that people who actually have Lyme disease are likely to test positive. The problem is that these tests aren’t very specific and give a high number of false positives (that is, not everyone who has a positive ELISA actually has Lyme). The other major type of antibody test in the early 1990s was the Western blot, which detects antibodies against a set of different Borrelia proteins. The Western blot is specific, such that people without Lyme reliably test negative, but not very sensitive.
By the time of the 1994 Dearborn meeting, manufacturers had developed a range of different indirect tests for Lyme, none of which produced the kind of definitive results needed to help diagnose a disease that could mimic a huge number of other conditions. What resulted from the meeting was the two-tiered testing protocol, in which a positive or equivocal ELISA would be followed by a Western blot for confirmation. Subsequent studies, however, showed that even this two-tiered approach didn’t always adequately catch all cases of Lyme disease, although newer approaches are trying to change this.
“Diagnostic tests are never perfect. And now folks who are journalists and people in the public are at this time becoming educated as to the challenges and limitations of technology,” says David Ecker, vice president of strategic innovation at Ionis Pharmaceuticals, who has also worked on molecular tests for other pharmaceutical companies. “They are not perfect. They never will be.”
After the Dearborn criteria were announced in August 1995, the Lyme community began to point out their weaknesses. One difficulty was the fact that the tests relied on antibodies. Antibiotic treatment in the early stages of disease was the shortest and offered the greatest chances of cure, but the body doesn’t produce antibodies to the Lyme bacterium immediately after infection. It is, Sellati says, a major issue with testing for antibodies to any pathogen, not just Lyme.
“At the start of an infectious disease—and this is whether it’s a bacterial infection or a viral or even a fungal infection—you have very few antibodies,” he says. “The level of antibodies circulating in your bloodstream may be very low. It might be below detectable levels, but the longer you’re infected, the more time your immune system has to develop antibodies.”
Patients were also unsatisfied with the two-tiered protocol. The International Lyme and Associated Diseases Society (ILADS), a nonprofit medical group that has garnered controversy by releasing its own treatment guidelines that counter those from the CDC, says that “even when the tests perform well, some cases will be missed if we rely solely on test results.” In 2004, years after her likely tick bite and first symptoms, Crystal says her first Lyme test came back negative.
“Diagnostic tests are never perfect. And now folks who are journalists and people in the public are at this time becoming educated as to the challenges and limitations of technology.” - David Ecker, vice president of strategic innovation at Ionis Pharmaceuticals
A year later, however, she says a repeat Western blot returned positive results for borreliosis, along with two other tick-borne diseases, ehrlichiosis, and babesiosis. As a patient advocate, Crystal says she has heard stories from patients who were told they couldn’t have Lyme because their tests were negative.
While she now describes her diagnosis as late disseminated Lyme disease—meaning it was not promptly or effectively treated—other patients who receive early care also describe lingering illness, for which the ILADS sometimes recommends long-term antibiotic treatment. Studies haven’t yet established whether this chronic Lyme is caused by lingering bacteria, an abnormal immune response, or both, nor have formal studies identified any effective treatment.
Because Lyme disease has historically been concentrated in the Northeast and in parts of the Midwest, where formal research had established both the Borrelia bacterium and the tick that transmitted it lived, doctors had more familiarity with the disease and its symptoms, according to Sellati. But in parts of the southern and western US, Crystal says that doctors frequently dismissed Lyme symptoms and would refuse to test. As with her COVID-19 experience, she says difficulties with getting tested meant that official case counts were likely much lower than the true number of people infected.
Similar to Lyme tests, those for the novel coronavirus have also been plagued with a series of issues. The very first diagnostic test for COVID-19 the CDC developed and distributed was designed to identify genetic material from the coronavirus, but laboratory contamination issues meant that the first set of tests were fatally flawed. Ongoing shortages in these test kits have meant that people with COVID-19 symptoms still don’t know whether they’re infected.
By early May, the U.S. Food and Drug Administration had granted several antibody tests for COVID-19 an emergency use authorization. But these tests, too, had issues. The biggest problem, both for public health agencies and the general public, were the possibility of false positives and false negatives. This highlights the challenges of antibody testing in general, according to Sellati.
“If you have a negative result, don’t take it at face value that you are truly negative, especially with the serological testing,” he says. “You should maybe wait a few weeks to give the immune system a little bit longer to perhaps produce antibodies.”
Such are the lessons in diagnostic testing that people the world over are now learning. As with her first Lyme test, Crystal’s COVID-19 test also turned up negative. “I guess it could be some other respiratory illness,” she says. “But if it walks like a duck, talks like a duck, and there’s ducks replicating all around,” she quips.
This time, however, the medical community and her friends and family had a different response when she expressed skepticism at the negative results. Instead of objecting when Crystal raised questions, her doctor and social group agreed with her assessment that the coronavirus test was likely a false negative. If one good thing comes out of the pandemic, Crystal says, it’s that people start thinking more critically about any sort of laboratory test.
“You have to fit into this very clinical box to be considered a COVID patient, even if you have all the symptoms and otherwise, you know, clearly seem to be one,” Crystal says.
“What I learned from Lyme disease,” she adds, “was you have to treat the patient, not the test.”

Solving the medical mystery of a brain that sees numbers as spaghetti


The condition could help us better understand perception.
By Hannah Seo June 29, 2020
The patient known as RFS looks at a number, but all he sees is “spaghetti.”
Show him a picture of one circle hovering above another, and he sees two circles. But as soon as the circles get close enough to look like an eight—spaghetti.
RFS developed corticobasal syndrome in 2010 at the age of 60, a rare progressive degenerative condition that affects less than one in 100,000 people per year and corrupts parts of the cortex and basal ganglia in the brain. After about a year of headaches, and flashes of vision loss and amnesia, RFS started having muscle tremors, difficulty walking, and—perhaps most strangely—the inability to see numbers. Experts have dubbed his number confusion “digit metamorphopsia,” and hope his condition could lead to a better understanding of human perception.
“Digit blindness isn’t quite accurate,” says Teresa Schubert, a neuropsychologist at Harvard and one of the lead authors of the new PNAS paper documenting RFS’s case. Blindness implies that he is seeing the number normally but just can’t recognize it—when actually every number he sees looks like a random assortment of tangled lines, like “a plate of spaghetti,” she says. In the paper, the researchers describe RFS holding a foam figure eight and saying that the shape is “too strange for words.”
Not only are numbers distorted, but the distortions change randomly each time. The “spaghetti” of an eight in one instance would look completely unrecognizable from the “spaghetti” of an eight in another.
“It’s just a mess every time. And that rules out any possibility of teaching him to recognize that this ‘spaghetti’ is a four and this is an eight,” Schubert says. “We also discovered that if other shapes are too close to a digit, they get absorbed into this warping, this spaghetti that he sees.”
So in the case of the two stacked circles, slowly coming together until they look like an eight, the visual distortion occurs as soon as RFS’s brain starts to categorize what he was seeing as a number.
But not all numbers are scrambled equally. Numbers in word form and Roman numerals all register normally with RFS. His condition only seems to warp common numerals, and even then there’s some discrepancy: zeroes and ones were completely spared, whereas two through nine are now completely unrecognizable.
So what’s going on? Schubert and her team have a few hypotheses. “It might be that zeroes and ones have very simple shapes with multiple interpretations,” she says. A zero could potentially be a circle or the letter ‘o,' while a one could be just a line or an ‘I’ or an ‘l.'
An alternate hypothesis is that zeroes and ones were saved because they both play a unique role in how we understand numbers and values.
“Zero as a concept wasn’t actually invented until many years after people started using digits,” Schubert says, and so when we think of things like the value of nothing, or different orders of magnitude, the digits zero and one have special roles in representing quantities. “It may be that those special roles protected them and preserved them when digits two through nine were getting damaged.”
But why numbers? Schubert says it’s probably random: “it could just as easily have been letters.” She explains that there are specialized areas in the brain that process things that people have to deal with regularly, like faces, digits, letters, and so on—these areas are all candidates for these conditions where whole categories can be knocked out.
The team also wanted to see if RFS could process other information in pictures of numbers. They showed him a large image of a number, with a word or image of a face somewhere inside the number, then asked RFS what he could see while monitoring his brain’s electrical activity on an EEG. RFS had no idea what he was looking at—it was all spaghetti. But the monitors showed that his brain detected the presence of a word or face even if he himself was not aware of it.
“This is a really unique case that disrupts our intuitions about the way we think we see things,” says Schubert. “When most of us think of ‘seeing,’ we think that an image comes through our eyes and is processed by the brain, and then, sight. But what this case is really showing us is that your brain can be unconsciously detecting a face or a digit or even reading a word without you actually ‘seeing’ it.”
So there are possibly many more stages to awareness and being conscious of something than we previously thought.
Scientists have suspected that your brain can identify something while leaving your conscious awareness out of the loop for a while, but it’s hard to experimentally prove, says Schubert. RFS’s case is incredibly strong evidence to back up this idea, and it will have huge consequences for research on perception. Any future theories that scientists come up with to explain how our minds become alert to information will have to reconcile with RFS’s case as an extra layer of criteria.
Today, RFS’s daily routine has needed some adjusting, to say the least. Digits are everywhere in modern life: clocks, books, recipes, prices, to name a few. To help RFS adapt with his digit metamorphopsia, Schubert’s colleague, Michael McCloskey, another author of the paper, came up with a new collection of symbols to represent numbers. RFS learned them quickly and has been using them for nine years now. Schubert and her team even enlisted the help of an engineering student to create a new calculator app with these new number symbols, and software for his laptop that converts digits on web pages. Of course, there are limitations. Static documents like books, PDFs, or the dials on the hood of a car are all still inaccessible to RFS.
To be clear, his understanding of numbers and the concepts of mathematics are all intact. In fact, up until a few years ago, he was still a working engineering geologist, and his mental arithmetic is still excellent. And while much of the numerical information in the world will remain out of his reach, RFS can live life more or less as normal—and he is mostly in wonder at his own condition.

A Superlative Quarter (Again)


Here's how some notable performers did in the second quarter of 2020:
Best-performing sector – Consumer Discretionary +32.6% (largest ever)
Worst-performing sector – Utilities +1.8%
Best-performing S&P 500 stock – Apache +223%
Worst-performing S&P 500 stock – Coty -13.4%
Best-performing DJIA stock – DuPont de Nemours +55.8%
Worst-performing DJIA stock – Walgreens Boots Alliance -7.3%
Best-performing market worldwide – Germany +26.2% (in USD)
Worst-performing market worldwide – China +5.8% (in USD)
Best-performing commodity – Gasoline +87.3%
Worst-performing commodity – Palladium -19.2%
Bloomberg Barclays U.S. Aggregate Bond Index +2.1%
10 Year Treasury Yield -0.038 percentage points 
Cboe Volatility Index (VIX) -40.6%
Gold +13.2% (largest gain since 1Q 2016)
WTI Oil +93.9% (largest gain ever)
U.S. Dollar -2%

Half-Time Report


By Nicholas Jasinski |  Tuesday, June 30
Halfway Done. Three months ago, we began Review & Preview with the sentence "Stocks fell today to close out a first quarter for the history books."
The bottom of the coronavirus bear market fell on March 23, just before the end of the first quarter. One of the steepest drops in stock market history and tumultuous trading across asset classes were almost perfectly captured by first-quarter statistics.
Well, today stocks rose to close out a second quarter for the history books. The past three months were almost a mirror image of the three months that preceded it. Stocks and other risky assets rocketed off their late-March lows, while bond yields remained ultralow and gold rose to an eight-year high.
Following the Dow Jones Industrial Average's worst first quarter ever—down 23.2%—the index posted its best second quarter performance since 1938—up 17.8% including a 0.8% rise today. The S&P 500 added 1.5% today to end the quarter up 20%—its largest quarterly gain since 1998. 
The Nasdaq Composite and Russell 2000 surged 30.6% and 25%, respectively, over the past three months. The indexes gained 1.9% and 1.4%, respectively, today.
Most of the second quarter's stock-market action took place in April and May. Major indexes have spent June in a relatively narrow trading range, as investors weighed increasing coronavirus cases against positive economic data.
Today's newsflow was a microcosm of that tug of war. Lagging economic indicators from the U.S. and China showed a rebounding global economy, while coronavirus cases and hospitalizations continued to rise in several U.S. states and regions abroad. Disease experts warned about losing control of the outbreak and warned Americans to stay away from bars ahead of the long July 4 weekend.
In the past two weeks, state and local officials in the U.S. and abroad have paused or rolled back reopening plans, some businesses have voluntarily shut their stores, and consumers appear to be responding on their own by staying home and spending less in areas with growing outbreaks. Arizona's governor tightened restrictions yesterday evening, shutting bars, gyms, movie theaters, and water parks for at least a month
That comes after rapid progress on reopening the economy, and major rebounds in economic indicators from depressed levels in March and April. Today, the Conference Board reported an 11 point rise in the June consumer confidence index, to 98.1 points, better than economists’ consensus estimate. American households remain more optimistic about the future than their current circumstances: the present situation index component of the survey rose 15.1 points, to 86.2, while  the expectations index rose 9.1 points, to 106.
In China, a survey of factory activity rose to a three-month high. The June manufacturing Purchasing Manager’s Index came in at 50.9, slightly ahead of economists’ expectations and indicating expanding activity. China’s Shanghai Composite gained 0.8% today.
The question on investors’ minds is whether those two trends—spreading coronavirus, improving economy—can continue to exist at once, or if new outbreaks will materially impact progress on the reopening of the economy and delay its recovery. Stocks will lack a concrete near-term direction until an answer becomes clearer.

7 Things to Know About the New DOL Annuity Sales Standard Proposal


 By Allison Bell | June 30, 2020 at 04:43 PM
The proposed standard could turn IMOs, FMOs and BGAs into the Impartial Conduct Standards cops.
The Employee Benefits Security Administration (EBSA) has unveiled a new sales standard proposal that could affect investment advice fiduciaries that help retirement savers roll cash from retirement plans into individual retirement accounts (IRAs).
EBSA is an arm of the U.S. Department of Labor (DOL), and the new draft is likely to set off a new wave of battles over who should regulate annuity sellers, and how.
Resources
·        A copy of the standards notice is available here.
·        Links to that document and related documents, such as a fact sheet summary, are available here.
·        An article about a new federal court Reg BI court ruling is available here.
DOL Secretary Eugene Scalia said in a comment in the proposal release announcement that the EBSA approach would give individuals the information they need to make good decisions.
The proposal “would give Americans more choices for investment advice arrangements, while protecting the retirement savings of American workers,” Scalia said.
EBSA is preparing to publish the proposal in the Federal Register and has posted a preliminary version on its own website.
Here are seven things to know about the new EBSA proposal, for financial professionals involved with annuities.
1. The new proposal is part of a long-running financial services sales standard fight.
The proposed standard is part of a long-running battle over how federal and state regulators should handle annuities, and between some fee-based advisors, who want anyone offering financial advice to abide by very strict standards, to avoid any hint of bias, and many commission-based financial representatives, who say that many consumers prefer to work with financial professionals without having to pay a fee.
The Employee Retirement Income Security Act of 1974 (ERISA) includes a provision requiring people involved with retirement plan assets to act as “fiduciaries,” and to make decisions in the best interest of the plan participants.
Critics argued that a “five-part test” used to apply the ERISA fiduciary provision was too vague and let commission-based con artists loot consumers’ retirement accounts.
When Barack Obama was president, the Labor Department completed work on a fiduciary rule regulation that would have imposed very strict, detailed requirements on indexed annuity sellers.
When Donald Trump became president, the department stopped defending the Obama-era approach to financial services sales standards, and the Obama-era DOL approach died in court.
The U.S. Securities and Exchange Commission is now implementing an alternative to the doomed DOL standard, Regulation Best Interest, or Reg BI, which imposes new disclosure requirements but continues to allow companies to pay commissions.
Many financial planner groups, investor groups and consumer groups have opposed the Reg BI-based approach, arguing that it does too little to curb aggressive, commission-driven sales practices.
The National Association of Insurance Commissioners (NAIC) has completed work on an annuity sales standards model that’s meant to be compatible with Reg BI. New York state has openly opposed the NAIC model. California has indicated concerns about the model but voted for adoption. Iowa and Arizona have both adopted the NAIC model.
The new DOL proposal would appear to be compatible with both Reg BI and the NAIC model.
2. Comments will be due 30 days after the official Federal Register publication date.
Preston Rutledge, the previous EBSA head, left the agency at the end of May.
Jeanne Klinefelter Wilson is now the acting assistant secretary of Labor who’s in charge of EBSA. Before she began working for EBSA, in 2017, she was a benefits lawyer at Continental Airlines and Waste Management and a benefits lawyer at Groom Law Group.
EBSA lists Susan Wilker and Erin Hesse as the proposal contact people.
3. The proposal is actually a “prohibited transaction exemption,” or PTE.
The proposal would allow transactions that normally would be prohibited by ERISA and by the Internal Revenue Code of 1986 (IRC).
EBSA reports an impact analysis that the PTE could apply to 3,764 broker-dealers, 12,940 investment advisors who are registered with the SEC, 16,939 advisors who are registered with state regulators, and 386 insurers that write at least some annuities.
4. The proposal is based on an ‘Impartial Conduct Standards’ framework.
“Impartial Conduct Standards” include a standard requiring a retirement fiduciary to act in the best interest of the retirement saver; a reasonable compensation standard; and a requirement for people subject to the requirements to make no materially misleading statements.
5. EBSA says the exemption would apply to retirement plan-to-IRA rollovers.
EBSA says the PTE would be available to “registered investment advisers, broker-dealers, banks, and insurance companies … and their individual employees, agents, and representatives (investment professionals) that provide fiduciary investment advice to retirement Investors.
The proposal defines “retirement plan investors” as participants in and beneficiaries of 401(k) plans and other similar types of retirement plans, IRA owners, and retirement plan and IRA fiduciaries.
The proposal would apply to prohibited transactions arising as a result of investment advice to roll over assets from a retirement plan to an individual retirement account (IRA).
Officials note that retirement savers may have rolled over about $2.4 trillion in plan assets into IRAs from 2016 through this year.
The exemption would also let financial institutions, such as life insurers, engage in principal transactions with plans ad IRAs in which the financial institution buys or sells certain investments from its own account.
Arrangements in which all advice was provided by a computer model might not be eligible for relief under the exemption, but EBSA is asking for comments on that point.
The exemption would also not apply to a retirement plan’s “named fiduciary,” such as a plan administrator, unless the sponsor chose the same company to provide investment advice.
6. EBSA says agents could still collect sales commissions, and many other forms of revenue.
Under the proposal, insurers and agents could get commissions, trailing commissions, sales loads, markups, markdowns, and revenue-sharing payments from investment providers or third providers,
7. The proposal could make various types of annuity distributors more important.
To qualify for the exemption, agents and life insurers would have to provide advice in accord with the Impartial Conduct Standards.
Life insurers would have to acknowledge their fiduciary status and their agents’ fiduciary status, in writing, when they and their agents were working with investors, and the life insurers would have to “adopt policies and procedures prudently designed to ensure compliance with the Impartial Conduct Standards and conduct a retrospective review of compliance.”
Life insurers with agents or brokers who work for multiple companies could supervise the producers, or they could have other organizations, such as independent marketing organizations (IMOs), field marketing organizations (FMOs) or brokerage general agencies (BGAs).
EBSA notes that IMOs, FMOS and BGAs that are investment advice fiduciaries can “apply for relief for the receipt of compensation in connection with the provision of investment advice on the same conditions as apply to the financial institutions covered by the proposed exemption,” according to the proposal text.

Genworth Says Would-Be Buyer Is Having Trouble Closing on Financing

By Allison Bell | June 30, 2020 at 03:14 PM
China Oceanwide's chairman says his company is committed to closing the transaction as soon as possible.
Genworth Financial Inc. says China Oceanwide Holdings Group Co. Ltd. of Beijing is having trouble nailing down the financing it needs to pay to acquire Genworth.
China Oceanwide — a financial services and real estate development company based in Beijing — has been trying to acquire Genworth for about four years. The company is in the process of closing on a $1.8 billion financing arrangement from Hony Capital, a big, Hong Kong-based private equity firm.
“Oceanwide has indicated that the financing has been delayed due to the COVID-19 pandemic and uncertain macroeconomic conditions,” Genworth said in a comment included in the financing delay announcement.
China Oceanwide has major developments in the center of Wuhan, which was hit especially hard by the COVID-19 outbreak.
Genworth and China Oceanwide said they will push the deal completion deadline back to Sept. 30, from June 30.
The extension is the 15th the companies have announced.
Genworth is a Richmond, Virginia-based company that is a large player in the mortgage insurance markets in the United States and Australia.
It sells some stand-alone long-term care insurance (LTCI), and it has been a major player in the life, annuity and LTCI markets.
The company has $1 billion in debt coming due in 2021 and potential liabilities related to litigation with AXA.
Because of the delay in the China Oceanwide deal closing, Genworth is preparing to handle the payments by borrowing money, and, possibly, by selling a 19.9% stake in the U.S. mortgage insurance business to the public, through an initial public offering, Genworth said.
The new deal extension calls for China Oceanwide to show Genworth, by Aug. 31, that China Oceanwide has $1 billion in funding from sources in China to pay for the deal, and $1 billion in financing from Hony Capital or other sources.
“If these conditions are met, the merger agreement will remain in place until Sept. 30, 2020. If the conditions are not met, Genworth has the right, in its sole discretion, to terminate the merger agreement as of Aug. 31, 2020,” according to the extension announcement.
Thomas McInerney, Genworth’s chief executive officer, said in a comment on the deal extension that the company heard stakeholders would like greater assurance that the China Oceanwide deal is moving toward closing.
The financing confirmation provision should address that concern, McInerney said.
“We continue to believe the transaction represents the best and most certain value for Genworth’s shareholders,” McInerney said.
Lu Zhiqiang, the chairman of China Oceanwide, said in a comment of his own that he’s still committed to the deal.
“We have overcome many hurdles during the past three and half years and continue to persevere because of the future value of Genworth to our vision of pursuing the significant opportunities for long term care (LTC) insurance in the U.S., China and the rest of Asia,” Lu said. “We remain committed to securing financing for the transaction in order to close the transaction as soon as possible.”
Correction: An earlier version of this article described Genworth’s mortgage insurance business incorrectly. It has operations in Australia.

https://www.thinkadvisor.com/2020/06/30/genworth-says-would-be-buyer-is-having-trouble-closing-on-financing/?kw=Genworth%20Says%20Would-Be%20Buyer%20Is%20Having%20Trouble%20Closing%20on%20Financing&utm_source=email&utm_medium=enl&utm_campaign=lifehealthnewsflash&utm_content=20200630&utm_term=tadv