Genworth Financial (NYSE: GNW) is raising $400 million through a public offering of senior notes, one of the many capital-raising initiatives taken by Genworth in the past two years. The debt offering is for a period of 10.5 years with an interest rate of 7.6%. Deutsche Bank (NYSE: DB) and Goldman Sachs (NYSE: GS) are serving as the joint book runners for the deal. Genworth intends to use the proceeds for general corporate purposes, but seems to a have few things in mind as it looks forward to raising additional capital.

The performance
Debt is fine -- provided one can service it with reliable forms of income. Genworth has been witnessing an improvement in most of its key financial metrics, after a series of disappointing quarters. Total revenue of the company rose by $1.02 billion in 2010, from $9.06 billion in 2009. Earnings took a huge leap, from a net loss of $460 million in 2009 to net income of $142 million in 2010. Revenue for the fourth quarter of 2010 improved to $2.59 billion, from $2.46 billion in the year-ago quarter.

Too much reliance on one segment
Of the three segments Genworth operates in, the retirement and protection segment looks most promising. The segment's revenue rebounded to $6.76 billion in 2010, from $5.66 billion in the previous year, whereas revenue for the other two segments declined. The profit for the segment, too, showed an impressive growth, rising to $403 million in 2010, compared to the net loss of $60 million in the preceding year, much more than for its peers.

Digging deeper
But a deeper analysis is required to evaluate the company's performance and understand the growth trend. Interest expenses for the company went up from $393 million in 2009 to $457 million last year. The company has already raised approximately $2.8 billion of capital during the past two years through varied sources. Out of this, $1.5 billion was raised through senior notes. The latest $400 million issuance has been assigned a "BBB" rating by Standard & Poor's, which, if you believe in the solemn word of the ratings institutions, is a credit-worthy grade.

This means that, officially speaking, Genworth's level of debt is manageable. But Fools should know better. Fundamentals dictate what levels of debt are appropriate and here I think Fools should be growing concerned.

The Foolish recommendation
Genworth has not been able to impress much with its overall performance and the purpose of these capital-raising moves is not very clear at the moment. The rising interest expenses, though not a major concern at the moment, may pose serious threats to the company's growth prospects if the plans don't work out in the desired way: while overall debt-to-equity may be a moderate 77%, the company's operating earnings-to-interest ratio is incredibly low, at just 1.2 times.

For the moment, I would advise Fools to be cautious of Genworth.