The Lloyds Banking Group is said to be weighing up a £15bn rights issue to avoid falling into majority government ownership. Lloyds is set to place £260bn of assets into the Government's Asset Protection Scheme, but is reluctant to pay the £16bn costs associated with the move. The group is 43 per cent owned by the state, but placing £260bn in the scheme would see this rise to more than 60 per cent. Lloyds got away with a £4bn rights issue in May and last week announced a £4bn loss in the first half of the year.
- The reaction?
The news dominated the business pages after being broken in The Sunday Times. The Lloyds share price dropped almost five per cent in morning trading. Reuters quoted two large shareholders doubting such a deal could be done. One of the group's top ten shareholders said: 'We don't see how this could be made to work ... it would be surprising if there is that much appetite for Lloyds' stock.'
- Who are the PR players?
Ex-HBOS man Shane O'Riordain heads comms at the combined group. This year it handed its retained financial PR account to Nick Miles' M: Communications.
- What happens next?
The reluctance to pay the hefty fees for participation in the Asset Protection Scheme and to sacrifice more control to the Government is understandable. But Lloyds will need to be very sure there is appetite in the market to absorb such a huge volume of new shares. There were notable rights issues failures in the sector back in 2008 before the banking crisis really took hold.
£15bn, Amount Lloyds is said to be looking to raise