Britain’s state-controlled Lloyds Banking Group (LBG) said yesterday that it would issue new shares to pay back public bailout funds.
The rights issue, worth £4 billion (US$6 billion), will be launched tomorrow and is to be underwritten by the state, the troubled bank said in a statement.
The news comes only one day after LBG chairman Victor Blank said he would step down from his post by June next year. Blank was sharply criticized for his role in Lloyds TSB’s takeover of rival lender HBOS, which was saddled with billions in toxic assets that have had to be covered by government money.
The British state owns around 43 percent of LBG, as well as P4 billion of preference shares, and could end up owning as much as 65 percent of the group if other shareholders snub the rights issue.
“Lloyds Banking Group confirms that it has agreed with HM Treasury to launch the previously-announced placing and open offer on 20 May, 2009,” Lloyds said.
“The proceeds from the placing and open offer will be used to redeem the £4 billion of preference shares held by [the government],” it said.
Under the terms of the offer, current shareholders can subscribe for 0.6213 new ordinary shares for every ordinary share they already own based on a price of 38.43 pence for each new year.
This price represents a discount of almost 57 percent to Lloyds’ closing share price on Friday. More details will be given tomorrow while shareholders will vote on the plans early next month.
In trade yesterday morning, LBG shares rallied 5.38 percent to 94 pence as investors welcomed news over the weekend that Blank would step down next year.
The Financial Times reported yesterday that former Citigroup chairman Win Bischoff and ex-Standard Chartered chairman Mervyn Davies were both in the running to replace Blank.
HBOS bank faced potential collapse last year as it struggled to raise funds because of a credit crunch that ravaged the sector.
The British government already owns 70 percent of the troubled Royal Bank of Scotland (RBS). RBS was also savaged by the global credit squeeze, as well as the 2007 takeover of Dutch group ABN Amro at the top of the market.
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