HBOS, Britain's biggest home lender, could have to be nationalised if its shareholders do not vote for a proposed £5.7 billion takeover by Lloyds TSB, its chairman warned today.
HBOS could need to raise more than 12 billion pounds at a more expensive rate than it has agreed to pay under the government's rescue plan, which is dependent on the Lloyds deal going through, Dennis Stevenson said in a letter to shareholders on the vote, which will take place on December 12th.
If they vote against the deal HBOS will need to find alternative methods of increasing its capital to the plan agreed with Lloyds and the government last month.
"There can be no certainty as to the sources of capital if the resolutions are not passed," Mr Stevenson told shareholders.
The government would take "appropriate action" to ensure the stability of the banking system, he said. Such action might include the issuance of shares to the government "or the loss of independent or private sector status for HBOS."
The government told HBOS it would need 12 billion pounds if it stayed independent, but the lender said "there can be no certainty" it would not need more than that or that it would be able to successfully raise capital.
HBOS is selling £3 billion of preference shares to the government and is raising £8.5 billion more from an offer to all shareholders, underwritten by the government.
If HBOS needed to go back to the government as a standalone bank or seek funds from elsewhere it would likely be on less favourable terms.
Reuters