Lincoln National (LNC) Comments On Liquidity, Has Not Withdrawn TARP Application

March 31, 2009 9:47 AM EDT

Following its 38% free-fall yesterday, after withdrawing its application to participate in the FDIC Temporary Liquidity Guarantee Program, Lincoln National Corp. (NYSE: LNC) is discussing its liquidity today.

Lincoln Financial said it will pay a $500 million debt maturity in full and on schedule on April 6, 2009. The repayment will be made with internal cash resources currently held at the holding company, rather than with any external financing from either private or government sources. The company also has $375 million of commercial paper outstanding under the Commercial Paper Funding Facility ("CPFF") authorized by the Federal Reserve Board and scheduled to mature in May of this year, which it will repay with available internal cash and the issuance of additional commercial paper without government guarantees. While Lincoln fully expects to be able to continue to issue commercial paper, the company has adequate internal cash resources and a $1 billion line of credit should the markets limit its ability to do so.

Lincoln Financial noted it previously submitted applications to two government programs, the FDIC Temporary Liquidity Guarantee Program and the Capital Purchase Program under the U.S. Treasury's Troubled Asset Relief Program. However, the company's capital and liquidity plans do not assume receipt of any government funding.

Lincoln's application to the TLGP program was made on an exception basis because its pending application to become a savings and loan holding company had not been approved at the time TLGP was initiated last year. Accordingly, the company recognized at the time it applied for TLGP that it might not be eligible to participate in the TLGP program.

On March 27, 2009, based on a recent discussion with the FDIC regarding its interpretation of TLGP eligibility requirements, Lincoln voluntarily withdrew its application for the program. Neither the eligibility requirements nor Lincoln's decision to withdraw its application were related in any way to the company's current or projected liquidity or capital needs. If the terms of TLGP are revised to broaden eligibility for the program, the company would consider submitting another application.

Lincoln has not withdrawn its application to participate in the TARP program and will evaluate this option if it becomes eligible for TARP funds.

Dennis Glass, Lincoln's President and Chief Executive Officer, said, "Lincoln has recently taken a number of steps to bolster its capital and liquidity positions in these difficult markets, including a $250 million cost reduction program, a $240 million reinsurance transaction and virtual elimination of the common stock dividend, and the Board is prepared to take additional actions to safeguard the company. We have additional securitization and reinsurance options and are also very fortunate to have a number of valuable assets that could be monetized to raise additional capital should the need arise. This flexibility, coupled with Lincoln's strong core franchise, gives us confidence in our ability to successfully navigate a very challenging environment."

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