Lloyds to Issue Up to $13 Billion of ECN Securities

Lloyds to Issue Up to $13 Billion of ECN Securities

Nov. 23 (Bloomberg) -- Lloyds Banking Group Plc, the U.K.’s biggest mortgage lender, will issue as much as about $13 billion of enhanced capital notes under its offers to exchange existing securities for new capital.

The London-based bank will issue 6.99 billion pounds ($11.6 billion) of ECNs under its non-U.S. exchange offer, plus 1.48 billion pounds of securities that may take the form of ECNs, new shares or cash, it said in a statement today. Lloyds accepted 8.78 billion pounds of securities for exchange under this offer.

Under the offer to swap U.S. securities, Lloyds said it will issue as much as $985.6 million of ECNs, an increase from the $800 million planned. A total $2.7 billion of notes were tendered under this exchange, Lloyds said.

The new ECNs, also known as contingent convertible core Tier 1 securities, or CoCos, will automatically become equity if the bank’s core capital falls to less than 5 percent, Lloyds said earlier this month. Lloyds is seeking to bolster its capital as part of its effort to avoid the U.K. government’s Asset Protection Scheme.

“We still do not think that a successful result in this exchange necessarily means that CoCos will become the next big thing,” Gary Jenkins, head of credit research at Evolution Securities Ltd. in London, wrote in a note before the results of the exchange. “They might, if regulators insist that large portions of the banking sector need to raise more capital, and that CoCos were their preferred option.”

bloomberg