Today, Lloyds Banking Group plc (Lloyds) announced a pre-emptive rights offering of 10,408,535,000 new ordinary shares at 38.43 pence per share (totalling approximately £3.94 billion, net of commissions) to registered shareholders, as previously agreed with HM Treasury (HMT) on May 18, 2009. The share price represents an approximate 54.6% discount to the May 13, 2009 closing price, and any shares not taken up by registered shareholders are expected to be placed in the market on their behalf. Lloyd's expects to use the proceeds from the offering to redeem £4 billion of preference shares issued to the HMT as part of a capital raising undertaken by Lloyds in conjunction with the acquisition of HBOS in January 2009. However, even assuming full subscription of the offering and subsequent redemption of the preference shares, HMT will continue to hold approximately 43.4% of Lloyd's total issued ordinary share capital. The redemption of the preference shares is separate from, and in advance of, Lloyd's proposed participation in the UK government's Asset Protection Scheme.
Lloyds' offer comes during a time when several U.S. bank holding companies have also recently tapped the capital markets, including this week's $2.0 billion common stock offering and $500 million senior debt offering by State Street Corporation, in order to fund all or a portion of their repurchases of preferred stock and related warrants issued to Treasury this past fall as part of Treasury's Capital Purchase Program.