Lloyds shares soar as terms of rights issue emerge

Lloyds shares soar as terms of rights issue emerge

Shares in Lloyds Banking Group, the semi state-owned institution, shot to the top of the FTSE 100 this morning as reports emerged that the government has approved plans for the group to sound out investors about raising funds in the market.

Reuters this morning reported details of how the group plans to raise money including a mandatory convertible of £2 billion, a £12 billion rights issue and contingent capital of £7 billion. The news agency reported that the group has also agreed some restructuring plans with the Financial Services Authority.

Separate reports have claimed that the chancellor, Alistair Darling, will allow Lloyds to put its capital-raising plans to the market in the next few days, as well as give it the go-ahead to formally appoint underwriters for the scheme.

Lloyds has long planned to exit the government's Asset Protection Scheme and go it alone, but in order to do so it needs to raise significant capital to provide a buffer against potential new bad debts.

Analysts have put the size of a capital raising at between £10-£15 billion, and Lloyds is already said to have drawn up a list of investment banks who would run the rights issue if it was formally approved.

While Darling is also understood to have reserved the right to withdraw the capital raising scheme if he deems it too risky, the market today reacted positively to the news that a rights issue could be unveiled any day.

By 08:50am, shares were ahead 4.31p or 5.4%, at 84.31p. Earlier in the week they dropped sharply, dipping below 80p, onfears that the group could be broken up.

citywire.co.uk