Capital raising: Lloyds gets its money, any which way
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Capital raising: Lloyds gets its money, any which way

Bond exchange sees strong take-up; Investors had little choice but to buy rights issue

Lloyds Banking Group is finally catching some breaks. Its £22.5 billion ($37.6 billion) underwritten capital-raising – the largest ever in Europe – saves it from falling even further into UK government ownership and has seen off the risk of the European Commission’s competition authority imposing a complete break-up, as it did on ING. Execution analyst Joseph Dickerson says the EC’s plan for ING "looks to us like a pre-pack bankruptcy expected to be funded by common shareholders via a rights issue". So Lloyds and its investors are mightily relieved not to share such a fate and its bonds and equities rallied as the £13.5 billion rights issue priced and the £9 billion bond exchange closed at the end of November.

Lloyds had been in negotiations with the EC long before the combined rights issue and exchange offer was devised with the help of UK regulators. Only as it approached launch did the competition authority approve a plan to divest 600 branches, comprising Cheltenham & Gloucester, Lloyds TSB Scotland and some others together equivalent to 4.6% of current account market share and 19% of the group’s mortgage book. Lloyds airily dismissed these state-aid remedies as immaterial.

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