John Hancock Financial Further Expands Investment in 'Build America Bonds' Program

BOSTON, April 15 /PRNewswire/ -- John Hancock Financial Services has further expanded its participation in the Build America Bonds program, completing more than 60 transactions that will help state and local entities across the United States rebuild their infrastructure as well as further strengthening the economic recovery of the nation as a whole.

Since the program's April 2009 inception as part of The American Recovery And Reinvestment Act, John Hancock has invested more than $2.6 billion in transportation, utility and higher education projects as well as general obligation investments across the United States.

The company said it expects to continue making investments in capital projects through the program through the rest of this year, when the program is currently scheduled to end.

"We remain firm supporters of the Build America Bonds program," said Scott Hartz, Executive Vice President of John Hancock Bond and Corporate Finance Group. "We are pleased to see the U.S. economy show signs of continued improvement. We regard the program, which opened conventional corporate debt markets to state and local governments, as a win-win for all participants, and we believe it helped the overall recovery."

Mr. Hartz said local communities and residents continue to benefit from the program which has provided financing for vital infrastructure projects, such as schools, roads and water plants that are being built or refurbished. Local communities and residents also benefit from the jobs these projects generate. Investors such as John Hancock benefit from being able to invest in the municipal debt markets. This high quality asset class previously was not a good fit for investors like Hancock because of the structure of the tax-exempt market.

The United States as a whole has benefited as the Build America Bonds program provided another tool to help stimulate an economy battered by one of the worst recessions since the Great Depression of the 1930s.

Traditionally, state and local governments have used tax-exempt bonds to provide capital to support infrastructure projects, but the recession sharply reduced tax-exempt demand causing state and local governments to either pay significantly more for capital or cancel any new projects.

The Build America Bonds program created a new financing tool for state and local governments. The bonds, which allow a new direct federal payment subsidy, are taxable bonds issued by state and local governments and give these entities access to conventional fully taxable debt markets.

At the election of state and local governments, the U.S. Treasury Department will make a direct payment to the state or local governmental issuer for an amount equal to 35 percent of the interest payment on the Build America Bonds. As result of this federal subsidy payment, state and local governments have lower net borrowing costs and are able to reach more sources of borrowing than with more traditional tax exempt tax credit lines.

This feature made Build America Bonds attractive to a broader group of investors, and therefore created a larger market than typically would invest in more traditional state and local tax exempt bonds, where interest rates, due to the federal tax exemption, have historically been about 20 percent lower than taxable interest rates. They should be attractive to investors without regard to their tax status or income bracket.

"Congress enacted the Build America Bonds program to broaden the market for municipal debt by providing more efficient subsidies and tax status," Mr. Hartz said. "We think the program has been very successful and have been pleased to participate in it and help rebuild America and its economy."

About John Hancock Financial and Manulife Financial Corporation

John Hancock Financial is a unit of Manulife Financial Corporation, a leading Canadian-based financial services group serving millions of customers in 22 countries and territories worldwide. Operating as Manulife Financial in Canada and in most of Asia, and primarily as John Hancock in the United States, Manulife Financial Corporation offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners. Funds under management by Manulife Financial and its subsidiaries were $440 billion (US$420 billion) as at December 31, 2009.

Manulife Financial Corporation trades as 'MFC' on the TSX, NYSE and PSE, and under '945' on the SEHK. Manulife Financial can be found on the Internet at www.manulife.com.

The John Hancock unit, through its insurance companies, comprises one of the largest life insurers in the United States. John Hancock offers a broad range of financial products and services, including life insurance, fixed and variable annuities, fixed products, mutual funds, 401(k) plans, long-term care insurance, college savings, and other forms of business insurance. Additional information about John Hancock may be found at www.johnhancock.com.

SOURCE John Hancock Financial Services