Freshfields, Linklaters, A&O land Lloyds’ record-breaking rights issue

Jeremy Parr

Lloyds has today announced a £13.5bn rights issue – the largest in UK history – alongside a separate transaction that will offer bond holders £9bn worth of contingent convertible notes, known as CoCos.

Linklaters is acting for Lloyds on both transactions, with corporate partners Matthew Bland and Jeremy Parr taking lead roles.

On the cash call, a Freshfields team led by UK corporate partner Julian Makin and his US counterpart Don Guiney is advising a syndicate of 18 banks acting as underwriters for the record-breaking deal.

Of these banks, six are also leading the syndicate underwriting the CoCos offer. These are: Citibank; Goldman Sachs; HSBC; JPMorgan Cazenove; Merrill Lynch; UBS.

Capital markets partner Stephen Miller led an Allen & Overy team acting for the banks on the CoCos deal.

The transaction involves an exchange of existing bonds for subordinated instruments that will convert from debt to equity if a pre-arranged trigger is breached. In this case, the trigger is if the core tier one capital ratio falls below 5 per cent. Following the conversion of CoCos the ratio will be around 6.5 per cent.

The Treasury holds 43 per cent of Lloyds ordinary shares and has confirmed that it will take up its rights in full, meaning a £5.7bn cash injection. Charles Randell is leading a Slaughter and May team acting for its longstanding client HM Treasury.

It is understood that there is appetite for both the CoCos exchange and the rights issue. The former is said to be over-subscribed even after the original offer of £7.5bn worth of notes was increased to the current level of £9bn.

The 36.5bn new shares issued will be sold at 37p – a 59.5 per cent discount on Monday’s closing price.

An extraordinary meeting of shareholders will take place on Thursday to approve both transactions.