Britain's Lloyds Banking Group priced its record £13.5 billion rights issue at 37p per share, a smaller than expected discount, as it battles to escape a costly state-backed insurance scheme for bad debts.
The cash call, the world's largest to date and a critical plank of Lloyds' bumper £22.5 billion capital raising effort, will involve the bank offering 36.5 billion new shares to investors.
It will offer the stock on the basis of 1.34 new shares for every existing one, the bank said. The new shares will represent just over 57 per cent of Lloyds' enlarged share capital.
Britain's largest retail bank had said it expected the offer price to be at a discount to the 38 to 42 per cent theoretical ex-rights price (TERP), and analysts had expected a price of around 35p, in the middle of that range.
But the bank, 43 per cent government-owned, came in with a marginally less aggressive discount than expected for its fully underwritten issue and a discount to TERP of 38.6 percent.
Compared with yesterday's closing price, the discount is close to 60 per cent. The shares closed yesterday at 91.47p.
Lloyds is seeking to bolster its capital to allow it escape the British government's asset protection scheme, set up earlier this year to protect banks against further credit losses, but now seen as too expensive.
The bank will now seek shareholder approval for the rights issue at a meeting on Thursday, after which dealing in nil-paid rights will begin. The new shares will begin trading on Dec. 14.
The bank, which has Britain's largest private shareholder base, said the average retail shareholder would pay 366.7 pounds to take up their rights.
As part of its bumper capital raising, Lloyds is also swapping existing debt into contingent or "top up" capital, which converts into common equity during a period of financial strain to shore up a bank's capital position.
It said yesterday demand for that exchange offer was strong, with offers of £12.5 billion from investors received for an £8.78 billion bond exchange, allowing the bank to raise the maximum £8.5 billion in contingent core tier 1 and core tier 1 capital.
Reuters