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November 25, 2009

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Huge discount on Lloyds shares

LLOYDS Banking Group Plc said yesterday that its shareholders will get a huge discount for subscribing to its 13.5 billion pounds (US$22.3 billion) rights issue -- the country's largest cash call yet, designed to limit British government control.

The pricing details published yesterday show that shareholders can buy 1.34 new shares for each existing share at 37 pence -- less than half of Lloyds closing price on Monday. The 36.5 billion new shares represent 57.3 percent of the bank's enlarged share capital. Lloyds shares were up 1.37 percent to 92.72 pence yesterday morning.

The government has agreed to exercise its rights for new shares, maintaining its equity stake in the bank at 43.4 percent.

Lloyds said earlier this month that it would not join the British government's insurance plan to protect against losses on toxic assets, and that it will raise funds by disposing of its TSB brand and sell the branches, savings accounts and branch-based mortgages of its Cheltenham & Gloucester unit. This week's cash call is another part of its move to maintain a degree of independence by raising funds.


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