Business

Thursday September 3, 2009

Lloyds wins backing for £10bil cash call


LONDON: Lloyds Banking Group has won backing from its investors to raise £10bil to reduce its dependence on the taxpayer, The Guardian reported on Tuesday.

The newspaper said the bank, 43%-owned by the British government after taking over HBOS last year, had won support from “important City (financial district) shareholders”, who said they are prepared to back CEO Eric Daniels if he decides on a partial withdrawal from the government’s insurance scheme.

The group has £260bil of toxic loans, and insuring them under the government’s Asset Protection Scheme (APS) would cost £15bil.

The insurance fee could only be paid if Lloyds allowed the government to buy new shares in the company, which would take the taxpayer’s stake in the bank to above 60%.

Daniels, however, was working on an alternative plan that would involve Lloyds insuring against bad loans worth only £130bil, the report said.

By cutting Lloyds’ exposure to the APS, fees would come down sharply. The money could be raised via a discounted rights issue.

Lloyds is conducting a general review of its operations to reduce the state aid it requires after the European Commission indicated concern about the scale of state assistance the bank has already received, and warned it may be forced to sell assets.

A Lloyds spokesman declined to comment on The Guardian story, saying only: “The group is working with the (UK) Treasury to finalise the terms of our intended participation in the APS. We expect to conclude those discussions and agree (to) terms that are in the best interest of our shareholders.” — Reuters

Most of the billions of pounds of writedowns that Lloyds has disclosed in the last nine months are linked to toxic loans granted by HBOS before it was taken over by Lloyds last autumn.

Lloyds recently reported a £4bil pre-tax loss, with HBOS accounting for about 80% of the group’s £14bil bad-loan provisions. — Reuters


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