Lloyds close to agreeing break fee of 2.5bn
LLOYDS Banking Group and the Treasury are close to rubber-stamping a deal under which the bank will fork out a break fee of £2.5bn to exit the government’s asset protection scheme (APS).
An announcement is expected possibly as early as tomorrow on the exact terms of Lloyds’ exit from the state-backed scheme, into which it had originally planned to place around £260bn of potentially toxic loans in return for the government taking a higher stake in the bank.
Under the terms of its exit deal, Lloyds will launch a £20.5bn capital raising programme to bolster its balance sheet, including a £13bn rights issue and £7.5bn of contingent convertible bonds.
Negotiations surrounding the fee Lloyds should pay for exiting the scheme have ranged from using the $425m (£257.3m) paid by Bank of America to leave a US asset guarantee scheme as a benchmark, to a fee of more than ten times that sum. The Treasury is now close to getting its way, with a figure of £2.5bn being touted as a near-final decision.
Lloyds is working on ways of tempting bondholders to exchange their bonds for riskier investments convertible into equity.