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Lloyds eyes US$6.1b in share placement
By Robert Barr |
May 19, 2009, Tuesday
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Print Edition
Print Edition
LLOYDS Banking Group yesterday formally launched a 4 billion pound (US$6.1 billion) share placement which could make the government its majority owner.
Lloyds is raising cash as part of a deal made with the government, which bailed out the group late last year after it got into trouble by taking over HBOS.
The placement will see the government substitute its current preference shares - worth 43.4 percent of Lloyds and which pay a fixed dividend - with ordinary shares, which give voting rights.
The government will underwrite the full amount of the share placement - taking at least 43.4 percent and buying up any unsold shares.
If Lloyds' other shareholders snub the offer, which is unlikely at current shares prices, the government could wind up with a 65 percent stake. That would be just below its 70.3 percent stake in Royal Bank of Scotland.
Last year, the government invested 17 billion pounds in bailing out Lloyds, buying a mix of ordinary shares with voting rights and the non-voting preference shares. That kept the government from holding a majority of the voting shares.
While the conversion to ordinary shares will save the bank 480 million pounds a year in dividend payments, the current share price gives it a reasonable chance of keeping the government's stake in ordinary shares below 50 percent.
Shareholders' unhappiness about the HBOS deal led to Sunday's announcement that company chairman Victor Blank would step down next year. Blank and Lloyds' Chief Executive, Eric Daniels, have insisted that they believe the HBOS transaction will pay off in the longer term.
Lloyds is raising cash as part of a deal made with the government, which bailed out the group late last year after it got into trouble by taking over HBOS.
The placement will see the government substitute its current preference shares - worth 43.4 percent of Lloyds and which pay a fixed dividend - with ordinary shares, which give voting rights.
The government will underwrite the full amount of the share placement - taking at least 43.4 percent and buying up any unsold shares.
If Lloyds' other shareholders snub the offer, which is unlikely at current shares prices, the government could wind up with a 65 percent stake. That would be just below its 70.3 percent stake in Royal Bank of Scotland.
Last year, the government invested 17 billion pounds in bailing out Lloyds, buying a mix of ordinary shares with voting rights and the non-voting preference shares. That kept the government from holding a majority of the voting shares.
While the conversion to ordinary shares will save the bank 480 million pounds a year in dividend payments, the current share price gives it a reasonable chance of keeping the government's stake in ordinary shares below 50 percent.
Shareholders' unhappiness about the HBOS deal led to Sunday's announcement that company chairman Victor Blank would step down next year. Blank and Lloyds' Chief Executive, Eric Daniels, have insisted that they believe the HBOS transaction will pay off in the longer term.
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