Lloyds Banking 43% Owned by UK, Investors Skip Deal
Monday, 12 January, 2009
Lloyds Banking Group, created with Lloyds TSB Group Plc’s takeover of HBOS Plc, will be 43 percent owned by the U.K. after investors declined the government’s offer to buy stock. Lloyds Banking will hold almost a third of British home loans, becoming the country’s biggest mortgage lender. HBOS, which declined 88 percent in the last 12 months, said in December that the charge for bad credit loans in 2008 rose to 5 billion pounds and loan defaults would continue in 2009.
Lloyds TSB received orders for 13.1 million shares, or 0.5 percent of the total offered to shareholders, the London-based company said in a statement today. HBOS Plc of Edinburgh got investor acceptances for 17.7 million shares, or 0.24 percent.
The British government, which underwrote both rights offerings, will have to buy almost all the ordinary shares it tried to sell. HBOS and Lloyds TSB traded below the offering price after mortgage approvals dropped to the lowest in a decade and house prices fell the most in 25 years. Lloyds Banking Group, scheduled to begin trading Jan. 19, becomes the country’s second bank after Royal Bank of Scotland Plc, now 58 percent owned by the U.K., to sell its largest stake to the government.
“They were trading below the offer levels,” said Leigh Goodwin, an analyst at Fox-Pitt Kelton Ltd. who has “in-line” ratings on Lloyds TSB and HBOS. “At least there isn’t a situation where the government’s holding will be immediately dumped in the market. If and when the stake is sold, it will be above the current market price.” HBOS rose 5.4 percent to 84.1 pence in London trading, leaving the shares 26 percent below the government’s offer price. Lloyds TSB rose 7 percent to 140.7 pence. That’s 19 percent below its offering price.
17 Billion Pounds
The government has a 3.6 billion-pound ($5.4 billion) mark- to-market loss based on Friday’s closing prices for HBOS and Lloyds TSB, Ian Gordon, a London-based analyst at Exane BNP Paribas, said in a note to investors. “We will look forward to working with UKFI, now that it has become a shareholder in the group pursuant to completion of the proposed acquisition,” Lloyds TSB’s Chief Executive Officer Eric Daniels said today in an e-mailed statement. “The new combined group will have a strong financial position.”
U.K. Financial Investments Ltd. is the company set up to manage the government’s holdings in banks after its 37 billion- pound recapitalization program. Capital injected into the combined Lloyds Banking is now 17 billion pounds. The right offerings raised 8.5 billion pounds for HBOS and 4.5 billion pounds for Lloyds TSB. The government previously agreed to buy preference shares amounting to 1 billion pounds from Lloyds TSB and 3 billion pounds from HBOS.
Biggest Mortgage Lender
The government’s holding in banks will be managed at “arm’s length,” Chancellor Alistair Darling said in October, though Prime Minister Gordon Brown has emphasized banks should lend more money at lower rates and change their bonus structures. Separately, Judge Angus Glennie approved Lloyds TSB’s takeover of HBOS at Scotland’s Court of Session in Edinburgh today, clearing the final hurdle in the deal.
Source: http://www.bloomberg.com/