Lloyds Banking to sound out investors on £25bn funding deal

Thursday, 29 October 2009 09:07

Lloyds Banking is to start courting investors over a deal to raise £25 billion.

The Financial Times reports Alistair Darling has given permission for the lender to speak to investors over the deal and possible underwriters.

It is reported Lloyds Banking is looking to raise £15 billion in a rights issue and as much as £10 billion debt held by bondholders could be converted to shares.

Currently the taxpayer holds 43 per cent of Lloyds Banking and such a deal would see the government pushing around £5 billion into the bank to maintain the stake.

This follows a further £8 billion that is to be lent to Northern Rock as a part of its restructuring to support new lending.

Lloyds Banking is looking to raise the funds as a way of stepping away from the government's asset protection scheme (APS).

The lender was planning to insure as much as £260 billion of toxic assets in the scheme - with the cost being a greater stake being handed over to the government.

Lloyds Banking is believed to be keen to keep a lid on the government's stake and moves this week from the European Commission competition authorities ordering ING to sell off assets in exchange for state aid has made the APS less palatable.

However, the rights issue may be scuppered by the recent fall in the Lloyds Banking share price.

Since the start of the month the Lloyds Banking share price has fallen 23.7 per cent from over 104p to closing at 80p last night.

This morning the share price rebounded 4.71 per cent to 83.77p by 08:44 GMT.

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