Lloyds Group tenders for four series of perpetual notes at 65% of par

By Susanna Moon

Chicago, June 16 – Lloyds Banking Group plc said it began a tender offer for some series of outstanding perpetual notes issued by Lloyds Bank plc and Bank of Scotland plc, formerly the Governor and Co. of the Bank of Scotland.

Lloyds is making the offer to give holders an opportunity to have their notes repurchased while “maintaining a prudent approach to liquidity as part of the group's ongoing liability management,” according to a company announcement.

Covered by the tender offer are any and all of the following outstanding notes:

• $267,350,000 primary capital undated floating-rate notes, series 1, issued by Lloyds Bank, with a coupon of six-month Libor plus 25 basis points;

• $280.12 million primary capital undated floating-rate notes, series 2, issued by Lloyds Bank, with a coupon of three-month Libor plus 18.75 bps;

• $359.3 million primary capital undated floating-rate notes, series 3, issued by Lloyds Bank , with a coupon of six-month Libor plus 10 bps; and

• $179.96 million undated floating-rate primary capital notes, series 4, issued by Bank of Scotland, with a coupon of six-month Libor plus 25 bps.

The purchase price will be $650 for each $1,000 principal amount plus accrued interest up to but excluding the settlement date.

The tender offer will run until 5 p.m. ET on June 22, with settlement on June 28.

Tendered notes may be withdrawn at any time before the offer ends.

The offer is not contingent upon any minimum amount of notes being tendered.

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

The dealer managers are BNP Paribas Securities Corp. (888 210-4358, 212 841-3059, +44 (0) 20 7595 8668, liability.management@bnpparibas.com), Citigroup Global Markets Ltd. (800 558-3745, 212 723-6106, +44 20 7986 8969, liabilitymanagement.europe@citi.com), Lloyds Bank plc (855 400-6511, 212 827-3105, +44 0 20 7158 2720, liability.management@lloydsbanking.com).

Other news

The Supreme Court has made a decision about the interpretation of some terms of Lloyd’s enhanced capital notes and has found in the group's favor, according to a separate announcement.

The court has held that a capital disqualification event has occurred as defined in the note conditions, the release noted.

“Throughout the process the group has sought to balance the interests of all stakeholders and the group welcomes this decision from the Supreme Court, which confirms the occurrence of a CDE and supports the group's redemption of all series of ECNs using the regulatory call right earlier this year,” the release added.

As previously announced, 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 of 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.

The company said 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.

Lloyds is a financial services company based in London.

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