By Susanna Moon
Chicago, March 20 - Lloyds Banking Group plc announced the results of the exchange offers for some series of notes as well as the details of its tender offer.
Lloyds said on March 7 that it began concurrent sterling, euro and dollar exchange offers for holders of some series of its enhanced capital notes as well as a tender offer to retail holders outside the United States to sell their sterling-denominated enhanced capital notes for cash.
The exchange offers began on March 6 and ended at 11 a.m. ET on March 19, with settlement expected to occur on March 20.
In the exchange offers, the company offered up to £5 billion of new additional tier 1 securities, according to a previous press release.
Lloyds will issue new perpetual subordinated contingent capital securities in the exchange offers as follows:
• €750 million of 6.375% initial coupon notes with conversion price of €0.78, reset reference rate plus 529 bps and first call or optional redemption date of June 27, 2020;
• £1,480,784,000 of 7% initial coupon notes with conversion price of £0.643, reset reference rate plus 506 bps and first call or optional redemption date of June 27, 2019;
• £1,494,392,000 of 7.625% initial coupon notes with conversion price of £0.643, reset reference rate plus 501 bps and first call or optional redemption date of June 27, 2023; and
• £750,009,000 of 7.875% initial coupon notes with conversion price of £0.643, reset reference rate plus 483 bps and first call or optional redemption date of June 27, 2029.
The euro additional tier 1 securities will be in registered form in denominations of €200,000 and integral multiples of €1,000 after that, and they will initially be issued in global form.
The sterling notes will be in registered form in denominations of £200,000 and integral multiples of £1,000 after that, and they will initially be issued in global form.
Exchange results for euro notes
Investors had tendered the following amounts for exchange, with the notes listed in order of priority acceptance levels:
• €663,143,000 of LBG Capital No. 1 plc's 6.439% notes due 2020 with €47.38 million outstanding after exchange settlement and 105.5 purchase price;
• €614,113,000 of LBG Capital No. 2 plc's 6.385% notes due 2020 with €47,842,000 outstanding after exchange, 105.5 price and 0.1021155 scaling factor;
• None of LBG No. 1's 7.625% notes due 2020 with €226,172,000 outstanding after exchange and 106.5 price;
• None of LBG No. 2's 8.875% notes due 2020 with €125.33 million outstanding after exchange and 110.50 price;
• None of LBG No. 1's 7.375% notes due 2020 with €94,737,000 outstanding after exchange and 106 price;
• None of LBG No. 1's floaters due 2020 with a coupon of Euribor plus 310 bps with €53.04 million outstanding after exchange and 93 price; and
• None of LBG No. 2's 15% notes due 2019 with €486,527,000 outstanding after exchange and 152.5 price.
The minimum new issue size condition for the euro notes exchange offer has been satisfied, according to a company press release.
Because the offer was oversubscribed, the company accepted for purchase all of the priority level 1 notes and the priority level 2 notes on a pro-rata basis with a scaling factor of 0.1021155, the company noted.
Sterling exchange offer
The company amended the exchange offers for the sterling notes, lifting the maximum new issue size to £1,480,784,000 from £1.25 billion, the release said.
The results of the exchange offers for the sterling notes are as follows, with the amount of notes accepted for purchase listed in order of priority acceptance level:
• £670,668,000 of LBG No. 1's 11.04% notes due 2020 with £65,543,000 outstanding after exchange and 111.75 purchase price;
• £309,537,000 of LBG No. 1's 7.8673% notes due 2019 with £21,533,000 outstanding after exchange and 106.5 price;
• £183,684,000 of LBG No. 2's 9.334% notes due 2020 with £23,879,000 outstanding after exchange and 108 price;
• £110,325,000 of LBG No. 2's 7.625% notes due 2019 with £41,097,000 outstanding after exchange and 105.5 price;
• £81,122,000 of LBG No. 2's 9% notes due 2019 with £15,609,000 outstanding after exchange and 107 price; and
• £276,000 of LBG No. 1's 8.125% notes due 2019 with £3.78 million outstanding after exchange and 104 price.
The minimum new issue size condition was satisfied for the sterling exchange offer.
Another sterling exchange offer
The company also amended the other exchange offer for sterling notes, increasing the maximum new issue size to £1,494,392,000 from £1.25 billion.
The results of the exchange offer are as follows, with the amount of accepted notes in order of priority acceptance level:
• £653.11 million of LBG No. 1's 7.5884% notes due 2020 with £79,166,000 outstanding after exchange and 106.25 purchase price;
• £569.2 million of LBG No. 1's 7.869% notes due 2020 with £27,465,000 outstanding after exchange and 106.5 price;
• £99,954,000 of LBG No. 2's 9.125% notes due 2020 with £47,637,000 outstanding after exchange and 107.5 price;
• £43.65 million of LBG No. 2's 12.75% notes due 2020 with £13.58 million outstanding after exchange and 114 price; and
• £33.7 million of LBG No. 2's 11.125% notes due 2020 with £4,889,000 outstanding after exchange and 110.5 price.
The minimum new issue size condition for the sterling exchange offer has been satisfied.
Third sterling exchange offer
The company also amended yet another exchange offer for sterling notes, increasing the maximum new issue size to £750,009,000 from £750 million.
The results of the sterling exchange offer are as follows, with the amount of accepted notes listed in order of priority acceptance level:
• £69,518,762 of LBG No. 1's 7.975% notes due 2024 with £32,532,170 outstanding after exchange and 105 price;
• £73.15 million of LBG No. 2's 11.25% notes due 2023 with £21,950,000 outstanding after exchange and 111.75 price;
• £61.6 million of LBG No. 2's 14.5% notes due 2022 with £17.85 million outstanding after exchange and 120.75 price;
• £59,558,000 of LBG No. 2's 10.5% notes due 2023 with £9,182,000 outstanding after exchange and 109.5 price;
• £46.05 million of LBG No. 2's 16.125% notes due 2024 with £15.3 million outstanding after exchange and 128.5 price;
• £51,847,000 of LBG No. 2's 9.875% notes due 2023 with £5,543,000 outstanding after exchange and 107.5 price;
• £15,735,000 of LBG No. 2's 11.875% notes due 2024 with £19,539,000 outstanding after exchange and 114 price;
• £106,391,000 of LBG No. 2's 9% notes due 2029 with £1,048,000 outstanding after exchange and 107.5 price;
• £99,644,000 of LBG No. 2's 8.5% notes due 2032 with £4,672,000 outstanding after exchange and 106.75 price;
• £71,006,000 of LBG No. 2's 15% notes due 2019 accepted using scaling factor of 0.243, with £704,152,000 outstanding after exchange and 144 price; and
• None of LBG No. 2's 15% notes due 2029 with £67,853,000 outstanding after exchange and 162.5 price.
The minimum new issue size condition has been satisfied for the sterling exchange offer.
Tender offers
LBG Capital No. 1 and LBG Capital No. 2 began a tender offer for their outstanding enhanced capital notes, with the purchase amounts announced March 20.
Holders must deliver their tender instructions by 11 a.m. ET on April 16, with at least £200,000 par amount of each series of notes.
The company will announce the aggregate par amount of securities to be accepted for purchase in the offers on April 17.
Settlement is expected to occur on April 24.
The purchase price for the notes issued by LBG Capital No. 1 plc or LBG Capital No. 2 plc covered by the offers are listed in order of priority acceptance level:
• 111.75% of par for LBG No. 1's 11.04% notes due 2020 with £65,543,000 outstanding after exchange settlement;
• 106.25 for LBG No. 1's 7.5884% notes due 2020 with £79,166,000 outstanding after exchange;
• 105 for LBG No. 1's 7.975% notes due 2024 with £32,532,170 outstanding after exchange;
• 106.5 for LBG No. 1's 7.8673% notes due 2019 with £21,533,000 outstanding after exchange;
• 106.5 for LBG No. 1's 7.869% notes due 2020 with £27,465,000 outstanding after exchange;
• 111.75 for LBG No. 2's 11.25% notes due 2023 with £21,950,000 outstanding after exchange;
• 108 for LBG No. 2's 9.334% notes due 2020 with £23,879,000 outstanding after exchange;
• 107.5 for LBG No. 2's 9.125% notes due 2020 with £47,637,000 outstanding after exchange;
• 120.75 for LBG No. 2's 14.5% notes due 2022 with £17,850,000 outstanding after exchange;
• 105.5 for LBG No. 2's 7.625% notes due 2019 with £41,097,000 outstanding after exchange;
• 114 for LBG No. 2's 12.75% notes due 2020 with £13.58 million outstanding after exchange;
• 109.5 for LBG No. 2's 10.5% notes due 2023 with £9,182,000 outstanding after exchange;
• 107 for LBG No. 2's 9% notes due 2019 with £15,609,000 outstanding after exchange;
• 110.5 for LBG No. 2's 11.125% notes due 2020 with £4,889,000 outstanding after exchange;
• 128.5 for LBG No. 2's 16.125% notes due 2024 with £15.3 million outstanding after exchange;
• 104 for LBG No. 1's 8.125% notes due 2019 with £3.78 million outstanding after exchange;
• 107.5 for LBG No. 2's 9.875% notes due 2023 with £5,543,000 outstanding after exchange;
• 114 for LBG No. 2's 11.875% notes due 2024 with £19,539,000 outstanding after exchange;
• 107.5 for LBG No. 2's 9% notes due 2029 with £1,048,000 outstanding after exchange;
• 106.75 for LBG No. 2's 8.5% notes due 2032 with £4,672,000 outstanding after exchange; and
• 144 for LBG No. 2's 15% notes due 2019 with £704,152,000 outstanding after exchange.
More background
The offers will allow investors "to exit their holdings in the ECNs at a price consistent with current trading prices, by either exchanging them for AT1 securities or ... by tendering them for cash," the company said.
The coupons of the new notes will range between 6.375% and 7.875%, and the new notes will be convertible into a fixed number of the group's ordinary shares at a sterling equivalent price of 64.3p should its reported fully loaded CET1 ratio fall below 7%, the company said.
The group said it currently has £8.4 billion nominal amount of enhanced capital notes outstanding in 33 separate series, which were issued by its subsidiaries LBG Capital No. 1 plc and LBG Capital No. 2 plc in 2009 as part of a significant capital-raising exercise in order to reinforce its going-concern capital ratios and to meet the Financial Services Authority's stress test requirements.
The enhanced capital notes have an average coupon of 9.3% and a core tier 1 conversion trigger of 5%. They contain a regulatory call right if they cease to be taken into account for the purposes of any stress test applied by the Prudential Regulation Authority (successor to the Financial Services Authority) for core capital.
The group said its management believes recent developments resulting in higher capital requirements for banks, including a changed definition of core capital, make it likely that the enhanced capital notes will not provide going-concern benefit under future stress tests.
For most series of securities, the relevant regulatory call price of par or the make-whole redemption price plus accrued interest is substantially lower than the purchase price under the relevant offer, Lloyds said.
The offers will help the group in aligning its capital base to the new capital framework established under the Capital Requirements Directive IV, the company said.
Exchange offer for dollar notes
LBG Capital No. 1 and LBG Capital No. 2 also began an offer to exchange fixed-rate reset additional tier 1 securities issued by Lloyds Banking Group for up to a total of $1,675,000,000 enhanced capital notes.
The notes are listed in the table below.
In exchange, Lloyds will issue between $750 million and $1,675,000,000 of 7.5% five-year MS+4.76% notes with a conversion price of $1.072.
The exchange offer began on March 6 and will run until 11:59 p.m. ET on April 2, with settlement set for April 3.
Agents and dealers
The tender agent is Lucid Issuer Services Ltd. (0800 376 0832 or +44 20 7704 0880, attn: Sunjeeve Patel/David Shilson/Victor Parzyjagla, email lbg@lucid-is.com).
The global coordinators and joint lead dealer managers are BofA Merrill Lynch (attn: John Cavanagh, +44 20 7995 3715, email john.m.cavanagh@baml.com), Goldman Sachs International (attn: Karl Bystedt Wikblom, +44 20 7996 0867, email karl.bystedtwikblom@baml.com, attn: liability management group, +44 20 7774 9862 or email liabilitymanagement.eu@gs.com) and Lloyds Bank plc (attn: Keval Shah, +44 20 7158 2021, email keval.shah@lloydsbanking.com, attn: Akis Psarris, +44 20 7158 3981 or email akis.psarris@lloydsbanking.com).
The joint lead dealers managers are Barclays Bank plc (attn: liability management group, +44 20 3134 8515, email eu.lm@barclays.com, attn: liability management group) and UBS Ltd. (+44 20 7567 0525, email mark-t.watkins@ubs.com/mahmoud.abdelaal@ubs.com).
The joint dealers managers are BNP Paribas (+44 20 7595 8668 or email liability.management@bnpparibas.com), Citigroup Global Markets Ltd. (+44 20 7986 8969 or email liabilitymanagement.europe@citi.com), Deutsche Bank AG, London Branch (+44 20 7545 8011 or email liability.management@db.com), J.P. Morgan Securities plc (+44 207 134 3414/+44 207 134 2468 or email EMEA_LM@jpmorgan.com) and Morgan Stanley & Co. International plc (+44 20 7677 5040 or email liabilitymanagementeurope@morganstanley.com).
The banking and financial services company is based in London.
Exchange offer for dollar notes, listed in order of priority acceptance level
| Issuer | Amount | Maturity | Coupon | Exchange price
|
| LBG No. 1 | $985,636,000 | Nov. 1, 2020 | 7.875% | 106
|
| LBG No. 2 | $407,578,000 | March 19, 2020 | 7.875% | 106.25
|
| LBG No. 1 | $1,258,631,000 | Undated | 8% fixed-to-float | 105.75
|
| LBG No. 1 | $276,658,000 | Undated | 8.5% fixed-to-float | 106
|
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