Lloyds TSB offers to issue new notes in swap for €415 million perpetual preferreds issued by HBOS

By Susanna Moon

Chicago, Feb. 2 - Lloyds TSB Bank plc said holders may exchange the €415 million fixed-to-floating guaranteed non-voting non-cumulative preferred perpetual securities issued by HBOS Euro Finance (Jersey) LP for new notes.

The purchase price will be 66% of par plus accrued interest, and holders must tender enough notes to be able to receive at least €50,000 principal amount of new notes in the exchange offer.

Interest on the existing tier 1 notes is Euribor plus 287.5 basis points, and notes are next callable on March 9.

Holders are being offered in exchange new lower tier 2 notes due Feb. 12, 2024 issued by Lloyds TSB Bank plc. Pricing will be set 8 a.m. ET on Feb. 9. The notes will be callable on Feb. 12, 2019.

The initial coupon will be the sum of 8.5%, which is the euro new notes spread, and the seven-year euro mid-swap rate, rounded down to the nearest 0.125%. The reset coupon will be the sum of 8.50% and a reset five-year mid-swap rate. The new notes will be issued in denominations of €1,000.

The exchange offer will end at 11 a.m. on Feb. 8.

Lucid Issuer Services Ltd. (+44 20 7704 0880, attn: Sunjeeve Patel, or e-mail: lbg@lucid-is.com) is the exchange agent. Lloyds TSB Bank plc (+44 20 7158 3981, attn: liability management group, or e-mail: liability.management@lloydsbanking.com) and Merrill Lynch International (+44 20 7995 3715/+44 20 7995 2324, attn: John Cavanagh or Tommaso Gros-Pietro, or e-mail: john.m.cavanagh@baml.com or tommaso.gros-pietro@baml.com) are the dealer managers.

The group continues to focus on its capital ratios, and the exchange offer is in the context of regulatory uncertainty about the final requirements of CRD IV regarding the form of new additional tier 1 securities, according to Lloyds press release.

The group said it will make decisions on calling any outstanding notes after the exchange offer "with reference to the prevailing regulatory, economic and market conditions at the time."

The retail bank is based in London and Edinburgh.

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