(LLOY.L) Lloyds Banking Group PLC Buy/Sell

Lloyds goes to shareholders to ratify record-breaking £13.5bn cash callShare issue will cost the taxpayer another £5.8bn

Jill Treanor The Observer, Sunday 22 November 2009 Article history Lloyds Banking Group is this week expected to announce the terms of its record-breaking £13.5bn cash call on investors. The share issue will require the taxpayer to pump an extra £5.8bn into the bank.

The bank, which has more private investors – 2.8m – than any other stock market-listed company, will face its shareholders on Thursday at a specially convened meeting in Birmingham to ratify the cash call and additional fundraising of more than £7bn coming from bond investors. Finding more than £21bn of fresh funds will allow Lloyds to avoid entering the government's asset protection scheme, a move that would have pushed the taxpayer stake to over 60%.

Instead, the taxpayer will retain its 43% shareholding by buying more shares in the rights issue at a cost of £5.7bn.

Lloyds has said the rights issue could be priced at a discount of around 38% to 42%. Analysts calculate that this means the new shares could be priced at about 33p. Some 40bn or so shares are likely to have to be issued, suggesting that around 1.5 new shares will have to be issued for each existing share.

The historic refinancing of Lloyds – code-named Seaview – follows the rescue takeover of HBOS by Lloyds TSB a year ago when some £17bn of taxpayer money was put into the bank. Lloyds has since repaid £3bn.

Private investors in Lloyds, most of whom own shares as a result of the flotation of the Halifax a decade ago, will soon receive information about how it much it will cost to participate in the cash call and take up their rights.
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