Insurance giant Lincoln Financial Group (LFG), whose holdings include the Lincoln Financial Media (LFM) radio group, announced plans to repay the US Treasury and exit the TARP program. The company plans to sell more than $1 billion of new stock and bonds to raise the cash.
LFG announced Monday that, after consultation with the Office of Thrift Supervision, it is conducting a public offering of equity and debt securities as part of a plan to fully repurchase the $950 million of LFG’s preferred shares issued to the US Treasury under the Treasury’s Capital Purchase Program (CPP). The offerings will consist of $335 million of common stock and up to $750 million of senior notes.
It was exactly a year ago that LFG announced that it was taking TARP funds as part of a reworking of its balance sheet.
LFG said it intends to repurchase the $950 million of preferred shares with net proceeds from the $335 million common stock offering, net proceeds from a $250 million senior notes offering and cash currently held at the holding company. The net proceeds of the additional sale of up to $500 million of senior notes will be used as part of a long-term financing solution supporting universal life reserves of LFG’s insurance subsidiaries.
“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,” said LFG President and CEO Dennis Glass. “Lincoln Financial always viewed this investment as temporary capital and intended to return it as soon as it was prudent,” he added.
The security sales will not completely separate LFG from Uncle Sam. The will continue to hold warrants to purchase approximately 13 million shares of LFG’s common stock at an exercise price of $10.92 per share. The company said it does not intend to repurchase the warrants. LFG’s stock had closed Friday, prior to the announcement, at $26.36. It rose in trading Monday after the announcement.
JP Morgan will serve as Global Coordinator for the offerings. Additionally, Credit Suisse, Morgan Stanley and Wells Fargo Securities will act as joint book-running managers for the equity offering and BofA Merrill Lynch, Deutsche Bank Securities and US Bancorp will act as joint book-running managers for the debt offering. The underwriters will have a 30-day option to purchase up to an additional 15% of the offered amount of common stock from the company.
RBR-TVBR observation: It looks to us like the US Treasury could exercise its warrants and sell the stock on Wall Street at a profit of $220 million or so. As taxpayers, that sounds like a good idea to us!