8-K: Lincoln National Issues $500M Senior Notes Due 2035

Lincoln National Corporation successfully completed a public offering of $500 million aggregate principal amount of 5.350% Senior Notes due 2035.

Summary

• Lincoln National Corporation completed a public offering of $500 million aggregate principal amount of 5.350% Senior Notes due 2035.
• The Notes were issued at a price to the public of 99.922% of the principal amount, resulting in net proceeds of $496,360,000 before expenses.
• A portion of the net proceeds will be used to repay the company's outstanding $400 million aggregate principal amount of 3.625% Senior Notes due 2026.
• The remaining net proceeds will be used for general corporate purposes, potentially including the repayment of other debt.
• The Notes are senior unsecured debt obligations, ranking equally with all other present and future unsecured unsubordinated obligations of the company.
• Interest payments will be made semi-annually on May 15 and November 15, commencing May 15, 2026.
• The company has the option to redeem the Notes prior to August 15, 2035 (Par Call Date) at a price based on the greater of a discounted present value or 100% of principal, plus accrued interest. On or after the Par Call Date, redemption is at 100% of principal plus accrued interest.

Sentiment

Score: 7

Explanation: The successful completion of a significant debt offering demonstrates the company's access to capital markets and ability to manage its debt structure, which is generally positive. The higher interest rate on new debt compared to the old debt is a slight negative, but expected in the current interest rate environment.

Positives

• Successful completion of a $500 million senior note offering demonstrates the company's access to capital markets and market confidence in its creditworthiness.
• The offering provides capital for refinancing existing debt, specifically the $400 million 3.625% Senior Notes due 2026, which helps manage the company's debt maturity profile.
• The ability to raise capital for general corporate purposes enhances financial flexibility.

Negatives

• The new 5.350% interest rate is higher than the 3.625% rate of the notes being repaid, indicating an increased cost of debt for the refinanced portion.
• The underwriting discount of 0.65% and other offering expenses reduce the net proceeds received by the company.

Risks

• Customary events of default as defined in the Senior Indenture could lead to the acceleration of principal and accrued interest payments.
• The company's ability to redeem notes early is subject to market conditions and the Treasury Rate, which could impact the cost of early redemption.
• General risks associated with debt obligations, including the company's ability to generate sufficient cash flow to meet interest and principal payments.

Future Outlook

The company plans to use a portion of the net proceeds from the offering to repay its 3.625% Senior Notes due 2026, with $400 million aggregate principal amount currently outstanding. The remaining proceeds will be allocated to general corporate purposes, which may include the repayment of other existing debt obligations.

Management Comments

• Lincoln National Corporation has caused this instrument to be duly executed under its corporate seal.
• The Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Industry Context

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Related Party Transactions

• Affiliates of certain underwriters are lenders under the company's Term Loan Agreement and/or Second Amended and Restated Credit Agreement.
• The company engages in bilateral open derivative transactions with certain underwriters.
• Underwriters and their affiliates may act as distributors of various life, annuity, defined contribution, and investment products of the company's subsidiaries.
• Underwriters and their affiliates may hold long or short positions in the company's debt or equity securities or loans for their own account or customers.

Stakeholder Impact

• Shareholders: The debt offering provides capital for refinancing and general corporate purposes, potentially stabilizing the company's financial position and supporting future operations, but the increased cost of debt could impact future earnings.
• Creditors: The new senior notes rank equally with other unsecured unsubordinated obligations, and the refinancing of older, lower-interest debt impacts the overall debt profile.
• Underwriters: Received an underwriting discount of 0.65% for their services.

Next Steps

• Semi-annual interest payments on the 5.350% Senior Notes due 2035, commencing May 15, 2026.
• Repayment of the 3.625% Senior Notes due 2026 on or prior to their maturity.
• Potential repayment of other debt using remaining net proceeds.

Key Dates

Keywords

Debt Offering, Senior Notes, Capital Raise, Refinancing, Corporate Finance, Fixed Income, Lincoln National Corporation, LNC, SEC Filing