Published on 3/7/2014 in the Prospect News Investment Grade Daily and Prospect News Liability Management Daily.
Lloyds Banking begins tender, exchange offers for 33 series of notes
By Susanna Moon
Chicago, March 7 - Lloyds Banking Group plc said it began concurrent sterling, euro and dollar exchange offers for holders of some series of its enhanced capital notes as well as a tender offer to retail holders outside the United States to sell their sterling-denominated enhanced capital notes for cash.
In the exchange offer, the company is offering up to £5 billion of new additional tier 1 securities, according to a press release.
The offers will allow investors "to exit their holdings in the ECNs at a price consistent with current trading prices, by either exchanging them for AT1 securities or ... by tendering them for cash," the company said.
The coupons of the new notes will range between 6.375% and 7.875%, and the new notes will be convertible into a fixed number of the group's ordinary shares at a sterling equivalent price of 64.3p should its reported fully loaded CET1 ratio fall below 7%, the company said.
The group said it currently has £8.4 billion nominal amount of enhanced capital notes outstanding in 33 separate series, which were issued by its subsidiaries LBG Capital No. 1 plc and LBG Capital No. 2 plc in 2009 as part of a significant capital-raising exercise in order to reinforce its going-concern capital ratios and to meet the Financial Services Authority's stress test requirements.
The enhanced capital notes have an average coupon of 9.3% and a core tier 1 conversion trigger of 5%. They contain a regulatory call right if they cease to be taken into account for the purposes of any stress test applied by the Prudential Regulation Authority (successor to the Financial Services Authority) for core capital.
The group said its management believes recent developments resulting in higher capital requirements for banks, including a changed definition of core capital, make it likely that the enhanced capital notes will not provide going-concern benefit under future stress tests.
For most series of securities, the relevant regulatory call price of par or the make-whole redemption price plus accrued interest is substantially lower than the purchase price under the relevant offer, Lloyds said.
The offers will help the group in aligning its capital base to the new capital framework established under the Capital Requirements Directive IV, the company said.
Tender offers
LBG Capital No. 1 and LBG Capital No. 2 began a tender offer for their outstanding enhanced capital notes, with the purchase amount to be announced on March 20, according to a separate press release.
The notes covered by the tender offer are listed in the table below.
Holders must deliver their tender instructions by 11 a.m. ET on April 16, with at least £200,000 par amount of each series of notes.
The company will announce the aggregate par amount of securities to be accepted for purchase in the offers on April 17.
Settlement is expected to occur on April 24.
Exchange offer for euro, sterling notes
In another separate press release, LBG Capital No. 1 and LBG Capital No. 2 said they began exchange offers for some of their euro and sterling notes.
In exchange they are offering up to €750 million or up to £1.25 billion additional tier 1 securities to be issued by Lloyds Banking Group.
The notes covered by the exchange offer are listed in the table below.
The additional tier 1 notes will be issued in the exchange offer in denominations of €200,000 and integral multiples of €1,000 after that, as follows:
• €500 million to €750 million of notes with an initial coupon of 6.375% and a conversion price of €0.780;
• €300 million to €1.25 billion of notes with an initial coupon of 7% and a conversion price of €0.643;
• €500 million to €1.25 billion of notes with an initial coupon of 7.625% and a conversion price of €0.643; and
• €300 million to €750 million of notes with an initial coupon of 7.875% and a conversion price of €0.643.
The offer began on March 6 and will end at 11 a.m. ET on March 19, with settlement expected to occur on March 20.
Exchange offer for dollar notes
LBG Capital No. 1 and LBG Capital No. 2 also began an offer to exchange fixed-rate reset additional tier 1 securities issued by Lloyds Banking Group for up to a total of $1,675,000,000 enhanced capital notes.
The notes are listed in the table below.
In exchange, Lloyds will issue between $750 million and $1,675,000,000 of 7.5% five-year MS+4.76% notes with a conversion price of $1.072.
The exchange offer began on March 6 and will run until 11:59 p.m. ET on April 2, with settlement set for April 3.
Agents and dealers
The tender agent is Lucid Issuer Services Ltd. (0800 376 0832 or +44 20 7704 0880, attn: Sunjeeve Patel/David Shilson/Victor Parzyjagla, email lbg@lucid-is.com).
The global coordinators and joint lead dealer managers are BofA Merrill Lynch (attn: John Cavanagh, +44 20 7995 3715, email john.m.cavanagh@baml.com), Goldman Sachs International (attn: Karl Bystedt Wikblom, +44 20 7996 0867, email karl.bystedtwikblom@baml.com, attn: liability management group, +44 20 7774 9862 or email liabilitymanagement.eu@gs.com) and Lloyds Bank plc (attn: Keval Shah, +44 20 7158 2021, email keval.shah@lloydsbanking.com, attn: Akis Psarris, +44 20 7158 3981 or email akis.psarris@lloydsbanking.com).
The joint lead dealers managers are Barclays Bank plc (attn: liability management group, +44 20 3134 8515, email eu.lm@barclays.com, attn: liability management group) and UBS Ltd. (+44 20 7567 0525, email mark-t.watkins@ubs.com/mahmoud.abdelaal@ubs.com).
The joint dealers managers are BNP Paribas (+44 20 7595 8668 or email liability.management@bnpparibas.com), Citigroup Global Markets Ltd. (+44 20 7986 8969 or email liabilitymanagement.europe@citi.com), Deutsche Bank AG, London Branch (+44 20 7545 8011 or email liability.management@db.com), J.P. Morgan Securities plc (+44 207 134 3414/+44 207 134 2468 or email EMEA_LM@jpmorgan.com) and Morgan Stanley & Co. International plc (+44 20 7677 5040 or email liabilitymanagementeurope@morganstanley.com).
The banking and financial services company is based in London.
Tender offer for sterling notes issued by LBG Capital No. 1 plc
| Amount | Maturity | Coupon | Purchase price
|
| £4,056,000 | Dec. 15, 2019 | 8.125% | 104%
|
| £331,070,000 | Dec. 17, 2019 | 7.8673% | 106.5%
|
| £736,211,000 | March 19, 2020 | 11.04% | 111.75%
|
| £732,276,000 | May 12, 2020 | 7.5884% | 106.25%
|
| £596,665,000 | Aug. 25, 2020 | 7.869% | 106.5%
|
| £102,050,932 | Sept. 15, 2024 | 7.975% | 105%
|
|
|
| Tender offer for sterling notes issued by LBG Capital No. 2 plc
|
| Amount | Maturity | Coupon | Purchase price
|
| £151,422,000 | Dec. 9, 2019 | 7.625% | 105.5%
|
| £96,731,000 | Dec. 15,2019 | 9% | 107%
|
| £775,158,000 | Dec. 21, 2019 | 15% | 144%
|
| £207,563,000 | Feb. 7, 2020 | 9.334% | 108%
|
| £147,591,000 | July 15, 2020 | 9.125% | 107.5%
|
| £57.23 million | Aug. 10, 2020 | 12.75% | 114%
|
| £38,589,000 | Nov. 4, 2020 | 11.125% | 110.5%
|
| £79.45 million | Jan. 30, 2022 | 14.5% | 120.75%
|
| £57.39 million | Feb. 10, 2023 | 9.875% | 107.5%
|
| £95.1 million | Sept. 14, 2023 | 11.25% | 111.75%
|
| £68.74 million | Sept. 29, 2023 | 10.5% | 109.5%
|
| £35,274,000 | Sept. 2, 2024 | 11.875% | 114%
|
| £61,350,000 | Dec. 10, 2024 | 16.125% | 128.5%
|
| £67,853,000 | Jan. 22, 2029 | 15% | 162.5%
|
| £107,439,000 | July 15, 2029 | 9% | 107.5%
|
| £104,316,000 | June 7, 2032 | 8.5% | 106.75%
|
|
|
| Exchange offer for euro notes, listed in order of priority acceptance level
|
| Issuer | Amount | Maturity | Coupon | Purchase price
|
| LBG No. 1 | €710,523,000 | May 23, 2020 | 6.439% | 105.5
|
| LBG No. 2 | €661,955,000 | May 12, 2020 | 6.385% | 105.5
|
| LBG No. 1 | €226,172,000 | Oct. 14, 2020 | 7.625% | 106.5
|
| LBG No. 2 | €125.33 million | Feb. 7, 2020 | 8.875% | 110.5
|
| LBG No. 1 | €94,737,000 | March 12, 2020 | 7.375% | 106
|
| LBG No. 1 | €53.04 million | March 12, 2020 | Euribor plus 310 bps | 93
|
| LBG No. 2 | €486,527,000 | Dec. 21, 2019 | 15% | 152.5
|
|
|
| Exchange offer for sterling notes, listed in order of priority acceptance level
|
| Issuer | Amount | Maturity | Coupon | Exchange price
|
| LBG No. 1 | £736,211,000 | March 19, 2020 | 11.04% | 111.75
|
| LBG No. 1 | £331.07 million | Dec. 17, 2019 | 7.8673% | 106.5
|
| LBG No. 2 | £207,563,000 | Feb. 7, 2020 | 9.334% | 108
|
| LBG No. 2 | £151,422,000 | Dec. 9, 2019 | 7.625% | 105.5
|
| LBG No. 2 | £96,731,000 | Dec. 15, 2019 | 9% | 107
|
| LBG No. | £4,056,000 | Dec. 15, 2019 | 8.125% | 104
|
|
|
| Exchange offer for sterling notes, listed in order of priority acceptance level
|
| Issuer | Amount | Maturity | Coupon | Exchange price
|
| LBG No. 1 | £732,276,000 | May 12, 2020 | 7.5884% | 106.25
|
| LBG No. 1 | £596,665,000 | Aug. 25, 2020 | 7.869% | 106.5
|
| LBG No. 2 | £147,591,000 | July 15, 2020 | 9.125% | 107.5
|
| LBG No. 2 | £57,230,000 | Aug. 10, 2020 | 12.75% | 114
|
| LBG No. 2 | £38,589,000 | Nov. 4, 2020 | 11.125% | 110.5
|
|
|
| Exchange offer for sterling notes, listed in order of priority acceptance level
|
| Issuer | Amount | Maturity | Coupon | Exchange price
|
| LBG No. 1 | £102,050,932 | Sept. 15, 2024 | 7.975% | 105
|
| LBG No. 2 | £95.1 million | Sept. 14, 2023 | 11.25% | 111.75
|
| LBG No. 2 | £79.45 million | Jan. 30, 2022 | 14.5% | 120.75
|
| LBG No. 2 | £68.74 million | Sept. 29, 2023 | 10.5% | 109.5
|
| LBG No. 2 | £61.35 million | Dec. 10, 2024 | 16.125% | 128.5
|
| LBG No. 2 | £57.39 million | Feb. 10, 2023 | 9.875% | 107.5
|
| LBG No. 2 | £35,274,000 | Sept. 1, 2024 | 11.875% | 114
|
| LBG No. 2 | £107,439,000 | July 15, 2029 | 9% | 107.5
|
| LBG No. 2 | £104,316,000 | June 7, 2032 | 8.5% | 106.75
|
| LBG No. 2 | £775,158,000 | Dec. 21, 2019 | 15% | 144
|
| LBG No. 2 | £67,853,000 | Jan. 22, 2029 | 15% | 162.5
|
|
|
| Exchange offer for dollar notes, listed in order of priority acceptance level
|
| Issuer | Amount | Maturity | Coupon | Exchange price
|
| LBG No. 1 | $985,636,000 | Nov. 1, 2020 | 7.875% | 106
|
| LBG No. 2 | $407,578,000 | March 19, 2020 | 7.875% | 106.25
|
| LBG No. 1 | $1,258,631,000 | Undated | 8% fixed-to-float | 105.75
|
| LBG No. 1 | $276,658,000 | Undated | 8.5% fixed-to-float | 106
|
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