Lloyds mulls over £15bn rights issue to avoid APS

| October 8, 2009 | 0 Comments

In order to avoid participating in the Government’s Asset Protection Scheme (APS), Lloyds Banking Group is looking at ways to raise cash with one option being tapping investors for £15 billion - which would be the biggest ever rights issue in UK corporate history.

The banking giant, which is 43% owned by the taxpayer, is understood to be in talks with the tripartite (which comprises the Treasury, Financial Services Authority (FSA) and Bank of England) to allow it to avoid the scheme altogether, which insures against losses arising from toxic assets.

It was announced last month that Lloyds was reconsidering its participation in scheme since it doesn’t want the taxpayer’s stake to rise any further.

However, following a series of stress tests conducted by the FSA, the City watchdog concluded that the bank required more capital to cope with soaring bad debts and therefore could not escape the scheme without the agreement of the tripartite.

Earlier this year, Lloyds agreed to put £260 billion into the scheme in return for a £15.6 billion fee.

However, Eric Daniels, Lloyds’ chief executive, is understood to be trying hard to persuade the tripartite to avoid the scheme arguing that the fee is too high and will give too much control to the Government.

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