Lloyds raises £170m to fund bond coupon

0
Have your say

Lloyds has raised £170m selling new shares to fund interest payments to hybrid-bond holders, making sure it continues to have good access to debt capital markets.

The European Commission banned Lloyds from paying dividends or making interest payments on some bonds after the bank got a bailout of around £20bn during the 2008 credit crisis.

That ban ended earlier this year, and Lloyds said in February it would restart coupon payments to holders of hybrid capital securities – designed to take a hit when a bank is going through tough times.

Those payments were estimated at around £170m, and Lloyds said this would be funded by the issue of 479.3 million new shares at 35.47p, adding the move would have a neutral effect on its capital position.

Daiwa Capital Markets credit analyst Michael Symonds said the deal made sense for Lloyds, allowing it to pay bondholders without depleting its capital position.

“Lloyds is raising equity to pay these coupons, as opposed to using cash, to neutralise the impact on its capital ratios.

“This looks like a prudent step given the current focus of investors and regulators on capital preservation,” Mr Symonds said.

Its equity capital-raising came after it drew down £11.4bn from the European Central Bank’s second offering of cheap three-year funds last month.

The bank has a core Tier 1 capital ratio of 10.8 per cent.