Tuesday, June 16, 2009

Lincoln's Outlook Revised to Stable

As we expected, Lincoln Financial agreed to accept roughly $1B from the federal government in the form of CPP proceeds. The Company was able to concomitantly raise $1.1B from the Market-$600M via a sale of common equity, and $500M from the sale of senior notes. S&P quickly revised it's outlook for Lincoln from Negative to Stable for essentially the same reasons that led us to characterize Lincoln as an adequately capitalized institution just last week. The only negative headline came via a downgrade of the Company's preferred stock to "BBB-" from "BBB". This action is the downside of, as we described it, "allowing Uncle Sam to insert himself into the...capital structure". The Federal Government has tended to make a loser out of at least one class of stakeholder in every business it has intervened in thus far. For Lincoln, assuming that no further Government aid is needed or sought, that investor class will be those holding the preferred stock. Sphere: Related Content

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