Lloyds Banking Group Plc, the UK’s biggest mortgage lender, plans to raise a record 13.5 billion pounds ($22.3 billion) in the country’s biggest rights offering, selling shares at a 59.5 per cent discount. The bank gained in London trading.
The shares will be sold at 37 pence each compared with Tuesday’s closing price of 91.47 pence a share, the London-based lender said in a statement. Lloyds will offer 1.34 new shares for every one held in an issue of 36.5 billion shares, it said.
Lloyds announced its intention to raise the money in a fully underwritten rights offering on November 3. The share sale will surpass that of HSBC Holdings Plc which raised 12.5 billion pounds in Britain’s biggest sale in March.
The decision is part of the bank’s plans to avoid the government’s Asset Protection Scheme, which would have raised the taxpayer stake to a majority from 43 per cent at present. Lloyds has 2.8 million shareholders and the biggest number of private shareholders in the UK, accounting for 7.5 per cent of its market value. Shareholders on average own 740 shares and the offering will cost them 366.67 pounds should they take up their rights, the company said.
“The discount is in line with expectations and within the range the company signaled,” said Simon Willis, an analyst at NCB Stockbrokers in London who has a “hold” rating on the stock. “There’s an element of relief that there is no surprise.”
Lloyds rose 1.6 per cent to 92.95 pence at 9:09 am, the only UK bank to rise today according to the five-member FTSE 350 Banks Index.
Shareholders will vote on the capital raising this week and the new shares will trade from December 14. It has already been approved by the government, which will pay about 5.8 billion pounds to take up its rights, adding to 14.5 billion pounds already committed by British taxpayers to aid the bank.
Lloyds yesterday said it would issue about $13 billion of enhanced capital notes under an offer to exchange securities for new capital.
The Lloyds offering is at a 38.5 per cent discount to its theoretical ex-rights price, known as TERP.
When HSBC sold shares in March, the lender priced stock at a discount of about 48 per cent to the previous trading day’s close, or 39 perc ent below the TERP. Other banks have sold shares for smaller discounts. Societe Generale SA, France’s second-largest bank by market value, offered stock at a 27 per cent discount to TERP when it raised 4.8 billion euros ($7.1 billion) from shareholders last month.
