Lloyds' exchange could net £200m

Britain's largest retail bank, which is 41 per cent government-owned and last month launched an exchange offer for $4 subordinated Upper

Tier $2 bonds, released "early bird" acceptance levels on Monday.

Ian Gordon, analyst at Exane BNP Paribas, said the take-up implied a gain of 207m for Lloyds if there were no further acceptances before the June 25 deadline. Lloyds will release the conversion price, exchange rates and ratios at that time.

Lloyds, Royal Bank of Scotland and other banks have conducted "liability management" several times in recent years, to buy back or exchange bonds at a discount to their par value to generate an equity gain and boost capital.

Lloyds also said the sole holder of an undated subordinated yen bond had accepted an agreement to exchange into new shares.

Mr Gordon said Lloyds could gain about 70m from the exchange and estimated that the bank could show liability management gains of 400m- 450m for the first half of this year.

Lloyds reopened the European subordinated bank bond market in March, along with Nordea, enabling the former to pull in long-term cash as it makes headway in changing its financing strategy.

It drew strong demand for a 9bn bond exchange in November last year, which was aimed at helping the bank exit a costly state-backed insurance scheme for bad debts.