In an attempt to repay its $950 million government bailout fund, Lincoln National Corp. (LNC) announced its intention to raise money through equity and debt offering. As a result, on Monday, the company publicly offered its common stock of about 12.3 million at a purchase price of $27.25 per share. The company expects to raise approximately $335 million from the offer.
While this equity stock offering is projected to be closed by June 18, 2010, Lincoln has offered its underwriters a 30-day optional purchase of an additional 15% or 1.8 million shares.
Taking its Troubled Asset Relief Program (TARP) repayment a step further, Lincoln has planned to raise an additional $750 million through a senior note offering. The company aims to utilize $250 million of these note offering proceeds, along with holding company cash, to repay the entire TARP amount as soon as possible. Previously, Lincoln had planned to exit the TARP program by the end of 2010 or early 2011.
While J.P. Morgan of JPMorgan Chase & Co. (JPM) served as global coordinator for the equity stock offering, Credit Suisse Group (CS), Morgan Stanley (MS) and Wells Fargo Securities, a wing of Wells Fargo & Co. (WFC) acted as joint book-running managers.
Also, Lincoln is vigorously seeking initiatives not only to repay the TARP amount but also to generate operating efficiencies in order to accelerate its core business growth. Toward this end, the company intends to utilize the remaining $500 million from its debt offering to provide financial support its long-term universal life reserves.
Moreover, as a result of its strong capital leverage, efficient debt restructuring and rating upgrades, Lincoln is poised to return the capital to its shareholders in the near future, thereby retaining investors’ confidence. Further, the complete repayment of TARP money liberates the life and property insurer from government involvement in its internal affairs and pay restrictions, even though the Treasury will still hold Lincoln’s warrants post-repayment.
Overall, Lincoln’s efforts of eliminating its debt appears to be crucial, particularly, when peers such as Hartford Financial Services Group Inc. (HIG) and American International Group Inc. (AIG) continue to move ahead in order to repay their TARP funds. While Hartford managed to repay its $3.4 billion TARP loan in March 2010, the only two insurers now left to repay the bailout money are AIG and Lincoln.
Read the full analyst report on “LNC”
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Read the full analyst report on “CS”
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Read the full analyst report on “WFC”
Read the full analyst report on “HIG”
Read the full analyst report on “AIG”
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