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- Liva & Laia : 15th November
Lloyds Banking Group will attempt to raise 7.5 billion pounds capital by offering existing bond holders the chance to exchange their bonds for riskier but higher yielding investments that could convert into equity, the Financial Times said on Monday.
As one element of the part-nationalised bank's 25 billion pounds recapitalisation programme, Lloyds is aiming to raise 7.5 billion pounds of so-called contingent convertibles or "Cocos" the FT said.
These are bond financings that would count towards core tier one capital and convert into equity if the bank finds itself in a crisis situation.
Bond holders may be encouraged to take part in the deal as the instruments would escape the ban on paying coupons the European Commission state-aid authorities may impose on the bank, which is 43.5 percent owned by the UK government.
A Lloyds' spokesperson was not available to comment.
The FT said that one person involved in the restructuring also said the bank would offer slightly more of the new securities to each bondholder, implying a yield up to 40 basis points, or 2-3 percent, higher than existing bonds.
The paper reported one person briefed on the plan said the instruments would convert to equity if Lloyds core tier one ratio fell below about 6 percent - under the 8-10 percent level that the bank is expected to have after its rights issue.
Lloyds may launch one of the world's largest cash calls as early as this week after talking to shareholders on Friday to gauge their appetite for the fundraising, investor sources told Reuters on Friday.
The bank approached shareholders on Thursday to get a rights issue of 12 billion pounds done before the Christmas holiday, as soon as it gets approval from the government and regulators. Two sources close to the matter said a deal could come as early as Tuesday.