Lloyds to issue $1.65 billion of 4.582% notes, 5.3% notes in exchange offer so far; pricing set

By Susanna Moon

Chicago, Dec. 8 – Lloyds Banking Group plc gave the early tender results of 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.

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.

As of 5 p.m. ET on Dec. 7, the early tender date, investors had tendered about $1,133,093,000 principal amount of the 2020 notes and about $283,386,000 principal amount of the 2033 notes.

Lloyds will issue $1,324,457,000 of new notes in exchange for the 2020 notes and $323,535,000 of new notes in exchange for the 2033 notes, according to a company notice.

The exchange offer will continue to run until 11:59 p.m. ET on Dec. 21, with settlement for early tendered notes on Dec. 10. Final settlement is expected to occur on Dec. 23.

The exchange offer began Nov. 23.

Pricing set

The total exchange value for each $1,000 principal amount is $1,169.05 for the 2020 notes and $1,146.34 for the 2033 notes. The total amount includes an early tender premium of $50 per $1,000 principal amount.

Those who tender their notes for exchange after the early deadline will receive per $1,000 par amount an exchange value of $1,119.05 for the 2020 notes and $1,096.34 for the 2033 notes.

Pricing was set 11 a.m. ET on Dec. 8 using a reference security plus a fixed spread as follows, according to a company notice:

• For the 6.5% notes, pricing was set using 1.375% Treasury due Oct. 31, 2020 plus 100 basis points for a reference yield of 1.692%; and

• For the 6% notes, pricing was based on the 2.875% Treasury due Aug. 15, 2045 plus 180 bps for a reference yield of 2.974%.

New notes

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.

The coupon for the new notes due 2025 was set at 4.582%.

For the 2033 notes, holders 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 2045 new notes value per $1,000 of notes is $1,003.88 and the 2045 new notes exchange ratio was set at $1,141.91.

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 with an issue date of Dec. 1.

Holders who tendered their notes for exchange by the early participation deadline will receive the total exchange value, which includes a $50 early participation payment.

Those who tender their notes after the early deadline will receive the exchange payment, which is the total value less the early premium.

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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