Britain has raised ￡3.2 billion (US$5.1 billion) from the sale of a 6 percent stake in Lloyds Banking Group, marking a milestone in their economic recovery from the 2008 financial crisis.
Britain pumped a combined ￡66 billion into Lloyds and Royal Bank of Scotland in 2008, leaving it with a 39 percent shareholding in Lloyds and an 81 percent stake in RBS.
The country’s Conservative-led coalition government sees the sale as an important step in its plan to recover taxpayers money and repair the UK economy and the disposal — plans for which were announced late on Monday — will be a boost to the Conservatives ahead of their annual party conference later this month.
“This is another step in the long journey in putting right what went so badly wrong in the British economy,” British Chancellor of the Exchequer George Osborne said yesterday. “It’s another step in repairing the banks, it’s another step in getting the money back for the taxpayer and it’s another step in reducing our national debt.”
The stock was sold to unnamed investment institutions at ￡0.75 per share, a 3 percent discount to Lloyds’ closing price on Monday and ahead of the government’s average buy-in price of ￡0.736, meaning the government will make a profit of ￡61 million.
The sale will reduce the government’s debt by ￡586 million, as the shares were on its books at ￡0.612, taking into account fees already repaid by Lloyds.
Jefferies analyst Jo Dickerson said the sale “was unequivocally positive” for both Lloyds and RBS.
“The simple manner in which the shares were placed will no doubt be welcomed by investors. We can only hope that the rest of the government’s stake in Lloyds and RBS is disposed of in such an effective manner,” he said.
UK Financial Investments, the body which is in charge of managing the state’s holdings in the two banks, sold the shares to financial institutions after Monday’s London market close through a fast track process known as an accelerated bookbuild. Bank of America Merrill Lynch, JP Morgan Cazenove and UBS Investment Bank were joint book runners. Lazard acted as capital adviser.
The sale was 2.8 times covered by demand from investors, a source with direct knowledge of the transaction said.
The government’s stake in Lloyds will be reduced to 32.7 percent from 38.7 percent. It has agreed not to sell any more shares in the bank for 90 days.