Lloyds set for deep discount in cash call…
LLOYDS Banking Group is tomorrow set to announce that its record-breaking £13.5bn rights issue will be priced at a deep discount of around 60 per cent, ahead of a meeting later this week to seek approval for the fundraising from its shareholders.
Lloyds, which is 43 per cent owned by the taxpayer, plans to raise a gargantuan total of £21bn through the cash call and a debt-for-contingent capital swap, in order to bolster its balance sheet ahead of its exit from the government’s toxic loan insurance programme, the asset protection scheme (APS).
The final pricing of the rights issue will depend on final fluctuations in the Lloyds share price, but is expected to be around 33p – a 61 per cent discount to the 85p at which the stock closed on 2 November, the day before the fundraising was confirmed by the group.
Lloyds has stated that the final price will be within a 38 per cent to 42 per cent discounted range of the theoretical ex-rights price (TERP), which the market expects will fall to around 55p following dilution from the issuance of new shares. It has set a floor of 15p for the cash call.
Such a discount range would have been viewed as enormous in the pre-credit crunch boom years, but has become the norm for companies tapping investors for money in rights issues this year.
The bank will square up to its shareholders on Thursday at a specially-convened meeting at the NEC in Birmingham. Lloyds’ institutional shareholders are understood to be widely supportive of the move, though it remains to be seen if the bank can convince its throng of 2.8m private investors to vote for the deal.
The Treasury has already confirmed it will be taking up its rights, injecting a further £5.7bn into the group.