Lloyds details exchange offer of 2020, 2025 notes for 2033, 2045 notes

By Marisa Wong

Morgantown, W.Va., Nov. 24 – Lloyds Banking Group plc disclosed more details on its offer to exchange outstanding subordinated debt securities issued by wholly owned subsidiaries HBOS plc and Lloyds Bank plc for Lloyds Banking Group’s new tier 2 subordinated debt securities. It began the offer on Monday.

The company is offering to exchange Lloyds Bank’s $2 billion 6.5% fixed-rate lower tier 2 notes due 2020 for new subordinated debt securities due 2025 and HBOS’ $750 million 6% subordinated notes due 2033 for new 5.3% subordinated debt securities due 2045.

The total exchange consideration for each series will be based on a fixed spread to the yield on the applicable reference security as of 11 a.m. ET on Dec. 8.

For the 2020 notes, the fixed spread is 100 basis points, and the reference security is the 1.375% Treasury due Oct. 31, 2020. For the 2033 notes, the fixed spread is 180 bps, and the reference security is the 2.875% Treasury due Aug. 15, 2045.

Holders of the 2020 notes will receive new subordinated debt securities due Dec. 10, 2025 with an interest rate set at a fixed spread of 235 bps over the bid-side yield on the 2.25% U.S. Treasury security due Nov. 15, 2025 as of 11 a.m. ET on Dec. 8.

Holders of the 2033 notes will receive new subordinated debt securities due Dec. 1, 2045. The value of the new 2045 notes will be discounted using the bid-side yield on the 2.875% Treasury due Aug. 15, 2045 as of 11 a.m. ET on Dec. 8 plus a fixed spread of 230 bps.

The new 2045 notes offered under the exchange offer will constitute an add-on of and form a single series with the $500 million of 5.3% notes due 2045 priced separately on Monday. Those notes are expected to be issued on Dec. 1.

Holders who tender their notes for exchange by 5 p.m. ET on Dec. 7, the early participation date, will be eligible to receive the total consideration, which includes a $50 early participation payment.

Holders tendering after the early deadline will only be eligible to receive the exchange consideration, which does not include the early participation amount.

The exchange offer is set to expire at 11:59 p.m. ET on Dec. 21.

Settlement of notes tendered by the early participation date is expected to occur on Dec. 10. Final settlement is expected to be on Dec. 23.

Lucid Issuer Services Ltd. (lbg@lucid-is.com, Sunjeeve Patel / David Shilson, +44 (0) 20 7704 0880) is the exchange agent.

The retail bank is based in London.

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