Lloyds wraps tender for euro, sterling notes; make-whole pricing set

By Susanna Moon

Chicago, Feb. 12 – Lloyds Banking Group gave the results of the cash tender offers for some euro and sterling securities issued by LBG Capital No. 1 plc and LBG Capital No. 2 plc.

The tender offers ended at 11 a.m. ET on Feb. 11. The offer had been extended from 11 a.m. ET on Feb. 8, with settlement following on Feb. 15. The offers began on Jan. 29.

Investors had tendered the following amount of notes, with pricing for each €1,000 or £1,000 principal amount, according to a company notice:

• €165,321,000 of LBG 2’s €486,527,000 15% enhanced capital notes due December 2019 with a purchase price of €1,389.33, or 136.933 using the 3.75% German government bonds due January 2019 plus a make-whole premium of 2%;

• €31,646,000 of LBG 2’s €125.33 million 8.875% enhanced capital notes due February 2020 with a purchase price of €1,020;

• €46,603,000 of LBG 1’s €53.04 million floating-rate enhanced capital notes due March 2020 with a purchase price of €1,020;

• €24,675,000 of LBG 1’s €94,737,000 7.375% enhanced capital notes due March 2020 with a purchase price of €1,020;

• €260,202,000 of LBG 2’s €661,955,000 (€614,113,000 outstanding) 6.385% enhanced capital notes due May 2020 with a purchase price of €1,020;

• €133,863,000 of LBG 1’s €226,172,000 7.625% enhanced capital notes due October 2020 with a purchase price of €1,020;

• £185,877,000 of LBG 2’s £775,158,000 (£703,465,000 outstanding) 15% enhanced capital notes due December 2019 with a purchase price of £1,342.90, or 132.29 using the 4.75% U.K. treasury stock due March 2020 plus a make-whole premium of 2%; and

• £48,061,000 of LBG 2’s £67,853,000 15% enhanced capital notes due January 2029 with a purchase price of £1,753.38, or 173.338 using the 6% U.K. treasury stock due December 2028 plus a make-whole premium of 2%.

The company also will pay accrued interest to but excluding the settlement date.

After the repurchases, there will remain outstanding €321,206,000 of the 15% notes, €93,684,000 of the 8.875% notes, €6,437,000 of the floaters due 2020, €70,062,000 of the 7.375% notes, €353,911,000 of the 6.385% notes, €92,309,000 of the 7.625% notes, £517,588,000 of the 15% notes due 2019 and £19,792,000 of the % notes.

Prices for the make-whole redemptions were set on Feb. 12, extended from 6 a.m. ET on Feb. 9.

More details

Lloyds was tendering for the £3.3 billion of outstanding notes, which were issued in 2009 under a significant capital raising exercise that included the issue of about £8.4 billion of enhanced capital notes.

The notes were issued for the purpose of counting as stress test core capital of the group and if any the notes stop counting for the purposes of a stress test, the issuer may exercise the regulatory call right, a previous release noted.

Lloyds announced on Feb. 9 that it had extended the cash tender offers to give holders more time to reflect on a Supreme Court decision affecting the notes.

On Feb. 8, the Supreme Court granted the trustee leave to appeal the Court of Appeal's judgment on Dec. 10 about whether a capital disqualification event had occurred for the notes and the company is giving holders more time to consider the decision, as previously reported.

The company said it if the Supreme Court were to decide that a CDE had not occurred for the notes, it would “fairly” compensate the holders whose securities are redeemed by reason of a CDE for losses suffered as a result of the early redemption.

Lucid Issuer Services Ltd. is the tender agent.

BNP Paribas (+44 20 7595 8668 or liability.management@bnpparibas.com), Deutsche Bank AG, London Branch (+44 20 7545 8011 or liability.management@db.com), Goldman Sachs International (+44 20 7774 9862 or liabilitymanagement.eu@gs.com), Lloyds Bank plc (+44 20 7158 2720 or liability.management@lloydsbanking.com), Merrill Lynch International (+44 20 7996 5698 or DG.LM_EMEA@baml.com) and UBS Ltd. (+44 20 7568 2133 or ol-liabilitymanagement-eu@ubs.com) are the dealer managers.

Dollar tender offers

LBG Capital No. 1 plc, an indirect wholly owned subsidiary of Lloyds, also began a tender offer for two series of its dollar-denominated notes.

The purchase price per $1,000 principal amount will be as follows:

• $1,020 for the $656,811,000 of 8% fixed-to-floating undated enhanced capital notes with a coupon beginning June 15, 2020 of Libor plus 640.5 bps and first call date of June 15, 2020; and

• $1,020 for the $276,658,000 of 8.5% fixed-to-floating undated enhanced capital notes with a coupon beginning Dec. 17, 2021 of Libor plus 692.1 bps and first call date of Dec. 17, 2021.

Holders also will receive accrued interest up to but excluding the settlement date.

The offer is not conditioned upon any minimum amount of notes being tendered but is subject to other conditions, which were not disclosed in the press release.

Tendered notes may be withdrawn before the offer ends.

The tender offer will run until 11:59 p.m. ET on March 2, with settlement following on March 4.

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

BNP Paribas (888 210-4358, 212 841-3059, liability.management@bnpparibas.com or +44 0 20 7595 8668), Deutsche Bank Securities Inc. (212 250 2955, 866 627 0391, liability.management@db.com or +44 20 7545 8011), Goldman, Sachs & Co. (800 828-3182, 212 902-5183, +44 0 20 7774 9862 or liabilitymanagement.eu@gs.com), Lloyds Securities Inc. (855 400-6511, 212 827-3105 or liability.management@lloydsbanking.com), BofA Merrill Lynch (980 388-4813, 888 292-0070, +44 0 20 7996 5698 or DG.LM_EMEA@baml.com) and UBS Ltd. (203 719-4210 or 888 719-4210) are the dealer managers.

Calls issued

Lloyds had received permission from the Prudential Regulatory Authority to redeem all series of enhanced capital notes outstanding, according to another previous press release.

The issuers called some series of enhanced capital notes for redemption on Feb. 9.

The refinancing of the high coupon securities is expected to provide a cash benefit to the group of £200 million per year over the next 4.5 years.

The actions will generate a day one accounting loss, largely from the acceleration of the write-off of the associated derivative asset, which would otherwise have amortized over the remaining life of the notes, the release said.

The notes covered by the tender offers are as follow:

• LBG 1’s €47.38 million 6.439% notes due May 23, 2020;

• LBG 1’s £58.25 million 11.04% notes due March 19, 2020;

• LBG 1’s £17.17 million 7.8673% notes due Dec. 17, 2019;

• LBG 2’s £20.56 million 9.334% notes due Feb. 7, 2020;

• LBG 2’s £39.95 million 7.6250% notes due Dec. 9, 2019;

• LBG 2’s £15.06 million 9% notes due Dec. 15, 2019;

• LBG 1’s £3.67 million 8.1250% notes due Dec. 15, 2019;

• LBG 1’s £60.51 million 7.5884% notes due May 12, 2020;

• LBG 1’s £26.03 million 7.869% notes due Aug. 25, 2020;

• LBG 2’s £46.36 million 9.125% notes due July 15, 2020;

• LBG 2’s £13.16 million 12.75% notes due Aug. 20, 2020;

• LBG 2’s £4.07 million 11.125% notes due Nov. 4, 2020;

• LBG 1’s £27.33 million 7.9750% notes due Sept. 15, 20204;

• LBG 2’s £18.75 million 11.25% notes due Sept. 14, 2023;

• LBG 2’s £15 million 14.5% notes due Jan. 30, 2022;

• LBG 2’s £8.68 million 10.5% notes due Sept. 29, 2023;

• LBG 2’s £14.3 million 16.125% notes due Dec. 10, 2024;

• LBG 2’s £5.11 million 9.875% notes due Feb. 10, 2023;

• LBG 2’s £15.92 million 11.875% notes due Sept. 1, 2024;

• LBG 2’s £620,000 9% notes due July 15, 2029;

• LBG 2’s £3.48 8.5% million notes due June 7, 2032;

• LBG 1’s $69.39 million 7.875% notes due Nov. 1, 2020; and

• LBG 2’s $328.95 million 7.875% notes due March 19, 2020.

Lloyds is a financial services company based in London.

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