WASHINGTON BUREAU — Lincoln National Corp. (NYSE:LNC) says it will fully repay the $950 million it owes the federal government under the Troubled Asset Relief Program.
Lincoln, Radnor, Pa., will repay the government for the TARP financing using the proceeds from a public offering of debt and equity securities, the company says in a report filed with the U.S. Securities and Exchange Commission. Lincoln borrowed TARP funds in 2009 through the Treasury Capital Purchase Program.
Hartford Financial Group Services Group Inc., Hartford (NYSE:HIG), also has repaid some of the funds it borrowed from the U.S. Treasury Department to cope with the 2008-2009 capital markets crisis.
Lincoln plans to offer $335 million of common stock and up to $750 million of senior notes to the public.
Up to $500 million will be used to support universal life reserves at Lincoln’s insurance subsidiaries, the company says.
JPMorgan Chase & Company, New York, will be the global coordinator for the offerings, and the underwriters have an option to buy 15% of the amount of common stock available through the public offering, Lincoln says.
After the transactions are completed, the Treasury Department will have warrants to buy about 13 million Lincoln shares at an exercise price of $10.92 per share, and Lincoln has no plans to buy back the warrants, Lincoln says.
“We appreciate the critical role the government and the American taxpayers have played in stabilizing the financial markets and we are pleased to announce a plan to repurchase Treasury’s investment sooner than originally anticipated,” Lincoln President Dennis Glass says in a statement. “Lincoln Financial always viewed this investment as temporary capital and intended to return it as soon as it was prudent.”
Standard & Poor’s Ratings Services, New York, responded to the announcement by affirming its ratings on Lincoln and its subsidiaries and keeping its outlook on Lincoln at stable.
S&P says it raised the rating on Lincoln National Capital VI and the preliminary rating on Lincoln’s preferred stock to BBB from BBB minus to reflect its view that, “following the repayment of TARP CPP, a one-notch rating differentiation between the company’s subordinated debt and preferred stock is no longer warranted.”
After the completion of the offerings, “we believe LNC will maintain substantial excess cash in the near term, which supports strong financial flexibility and is available to further supplement the capital adequacy of its insurance operations,” S&P says.
Moody’s Investors Service, New York, earlier changed its outlook on Lincoln to stable, from negative.