Prudential Declines Bailout, to Issue Stock

By STEPHEN BERNARD

posted: 179 DAYS 18 HOURS AGO

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NEW YORK (June 1) - Prudential Financial Inc. said Monday it will not take funds from the government's financial rescue program, but it is planning to raise $1.25 billion on its own through a common stock offering.

The Newark, N.J.-based life insurance and financial services firm said it will not participate in the Treasury Department's Troubled Asset Relief Program. Last month, the government said it would allow Prudential and five other major insurers to tap the program for additional capital. The other insurers included Hartford Financial Services Group Inc., Allstate Corp., Lincoln National Corp., Ameriprise Financial Inc. and Principal Financial Group Inc.

Both Allstate and Ameriprise have already declined to accept the funds.

As hundreds of banks accepted billions in government bailout funds last fall, some life insurers aggressively lobbied for their own piece of the federal aid program. The insurers were worried about their balance sheets, which have been hammered by hefty investment losses from declines in the stock market. The government approved those requests last month.

Instead of using the government to improve its financial position, Prudential will launch a public stock offering to raise $1.25 billion in new cash to bolster its reserves. It will use the additional funds for general corporate purposes, which could include adding capital to its insurance subsidiaries, for the repayment of short-term debt or for potential strategic initiatives.

Underwriters of the offering have been granted a 30-day option to purchase an additional $188 million in shares.

Shares of Prudential closed Friday at $39.91.

Last fall when the government began the program, financial firms were unable to raise new cash through stock offerings or other private deals because the mushrooming credit crisis essentially shut down the credit and lending markets. That left the government as one of the few alternatives to get needed cash to help offset mounting losses because of the worsening economy.

Since the market began to rebound in early March, investors have become more receptive to buying new shares of financial firms. Some banks that received TARP funds last fall have already begun repaying the loans or raised new cash through stock offers in advance of repaying the debt.

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2009-06-01 06:57:42