Lloyds Banking Group said it had agreed to swap £8.78 billion of bonds as part of a deal aimed at funding its exit from a costly state-backed insurance scheme for bad debts.
Lloyds, Britain's third-biggest lender, received offers for £12.51 billion from investors, it said today, describing demand for the exchange as "strong".
Lloyds' bond swap forms part of a £21 billion capital raising to allow it to escape the government's so-called asset protection scheme, set up in March to protect the bank against further credit losses, but now seen as too expensive.
Under the terms of the exchange, Lloyds offered investors new bonds -- enhanced capital notes -- in exchange for a range of hybrid bonds that it would not pay dividends or coupons on for two years from the end of January 2010.
The new bonds are designed to convert into equity if Lloyds' core Tier 1 capital ratio falls below 5 per cent.
Lloyds had increased the size of its exchange offer to non-US investors to £9 billion on November 11th due to strong investor demand.
Reuters