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Risk Warning
24/11/2009
LLOYDS' 271,000 private shareholders in Yorkshire were given an opportunity yesterday to take part in the world's largest rights issue.
Lloyds has set a price of 37p a share as it asks shareholders to stump up £13.5bn in a bid to avoid asking the state for money, which would prove far more costly. The average Yorkshire investor has around 525 shares. Under the scheme the average shareholder in the region will be allotted 703 shares. If they decide to take up their rights it will cost them an average of £260.11.
The new shares are priced at a 60 per cent discount to Monday's closing price and are being sold within the range previously indicated by the bank.
Analysts welcomed the placing and said the new shares offered investors an attractive way to play a UK recovery. Richard Curr, at Prime CFDs, said: "It looks as though it is mission accomplished for Lloyds as the stock market reaction to the 37p a share rights issue appears very positive.
"This should be enough to propel the stock back to last month's highest levels as the uncertainties are finally resolved over the bank's financing issues."
Lloyds said earlier this month it planned to avoid a costly Government-backed insurance scheme for toxic loans by asking investors for cash. It plans to raise a total of £22.5bn to repair its balance sheet, which has taken a battering following the takeover of Halifax Bank of Scotland earlier this year.
Lloyds' heavily discounted £13.5bn cash call comes alongside a £9bn debt exchange.
The fundraising should remove a major element of uncertainty for the bank. Lloyds said earlier this month it expected the offer price to be at a discount of 38 to 42 per cent to the theoretical ex-rights price and analysts had expected a price of around 35p, in the middle of that range. But Lloyds came in with a slightly less aggressive discount at 37p.
Lloyds, 43 per cent owned by the Government after it was bailed out last year, will seek shareholder approval for its plans at a General Meeting in Birmingham tomorrow. One of its key challenges will be to persuade its shareholder base which includes 2.8 million private investors, the largest base of small shareholders for a UK company.
The bank said the average retail shareholder would pay £366.67 to take up their rights.
Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily a guide to future performance. Trading in these markets is generally considered to be suitable only for the more experienced investor as it carries a high degree of risk. An investor may not receive back the amount of their original investment and in certain circumstances may be liable for a sum that is greater than their original investment. If in any doubt, please seek independent financial advice.