Lloyds Banking Group begins exchange for dollar debt, tender offers for sterling debt

By Marisa Wong

Los Angeles, Nov. 10 – Lloyds Banking Group plc announced it has begun an offer to exchange new notes and cash for five series of dollar-denominated securities.

Lloyds also announced on Wednesday contemporaneous tender offers for three series of sterling-denominated preference shares.

Dollar exchange offer

Lloyds is offering to exchange fixed-rate reset subordinated debt securities due Dec. 14, 2046 with a call date in 2041 plus, if applicable, a cash consideration, along with accrued dividends or interest in cash, plus cash amounts in lieu of any fractional new notes for:

• Any and all of two series of preference shares and one series of subordinated notes; and

• Up to a capped amount of two series of subordinated debt securities.

Under the any-and-all portion, Lloyds is offering to exchange the following existing securities:

• $374.81 million outstanding 6.413% non-cumulative fixed-to-floating series 1 preference shares (ISIN: US539439AC38, USG5533WAA56) with a call date on Oct. 1, 2035, with the exchange consideration to be based on the 1.25% U.S. Treasury due Aug. 15, 2031 and a fixed spread of 107 basis points and with a cash consideration of $146 per $1,000 principal amount;

• $434.35 million outstanding 6.657% non-cumulative fixed-to-floating series 2 preference shares (ISIN: US539439AF68, US539439AE93) with a call date on May 21, 2037, with the exchange consideration to be based on the 1.75% U.S. Treasury due Aug. 15, 2041 and a fixed spread of 83 bps and with a cash consideration of $110 per $1,000 principal amount;

• $466,113,000 outstanding 6% subordinated notes due Nov. 1, 2033 (ISIN: US4041A2AF14, US4041A3AG79) issued by HBOS plc, with the exchange consideration to be based on the 1.25% U.S. Treasury due Aug. 15, 2031 and a fixed spread of 100 bps and with a cash consideration of $145 per $1,000 principal amount.

Under the capped part, Lloyds is offering to exchange up to a cap amount of the following:

• $1 billion outstanding 4.5% fixed-rate subordinated debt securities due Nov. 4, 2024 (ISIN: US53944YAA10), with the exchange consideration to be based on the 0.75% U.S. Treasury due Nov. 15, 2024 and a fixed spread of 50 bps and with no cash consideration; and

• $1,327,685,000 outstanding 4.582% subordinated debt securities due Dec. 10, 2025 (ISIN: US539439AM10), with the exchange consideration to be based on the 1.125% U.S. Treasury due Oct. 31, 2026 and a fixed spread of 50 bps and with no cash consideration.

The cap amount is a principal amount of existing notes that would result in $750 million principal amount of new notes being issued under the exchange offer, after taking into account the amount of new notes to be issued under the any-and-all part of the offer.

If the amount of securities tendered under the any-and-all offer is $750 million or more, all of those tendered securities will be accepted but no capped offer notes will be accepted.

Capped offer notes are subject to proration.

The exchange offer is subject to a minimum of $500 million of new notes being issued in exchange for the existing securities.

Pricing for the new notes will be based on the 1.75% U.S. Treasury due Aug. 15, 2041 and a spread of 150 bps. The notes will be issued at par. The reset coupon is the five-year U.S. Treasury rate plus 150 bps. The notes will be callable from and including Sept. 14, 2041 to and including Dec. 14, 2041.

The exchange consideration for each series and the coupon for the new notes will be determined at 10 a.m. ET on Dec. 7.

The exchange offer will end at 11:59 p.m. ET on Dec. 9, also the withdrawal deadline.

Results will be announced on Dec. 10, and settlement is expected to occur on Dec. 14.

The global coordinators and joint lead dealer managers for the exchange offer are BofA Securities, Inc. (+44 20 7996 5420, 888 292-0070, 980 387-3907, DG.LM-EMEA@bofa.com), Credit Suisse Securities (USA) LLC (+44 20 7883 8763, 212 538-2147, 800 820-1653, liability.management@credit-suisse.com) and Lloyds Securities Inc. (212 827-3145, NALSIBondSyndicate@lbusa.com).

Lucid Issuer Services Ltd. (+44 20 7704 0880, lbg@lucid-is.com, https://deals.lucid-is.com/lbg-us) is the exchange agent.

Sterling tender offers

Lloyds is inviting holders of the following series of preference shares to tender any and all of their shares for cash:

• £198,065,600 6.475% non-cumulative preference shares (ISIN: GB00B3KSB568), with £56,472,211 liquidation preference outstanding, at a purchase price of 112.05;

• £300 million 9.25% non-cumulative irredeemable preference shares (ISIN: GB00B3KS9W93), with £299,987,729 liquidation preference outstanding, at a purchase price of 167.25; and

• £100 million 9.75% non-cumulative irredeemable preference shares (ISIN: GB00B3KSB238), with £55,740,886 liquidation preference outstanding, at a purchase price of 174.2.

The offers expire at 8 a.m. ET on Nov. 19. This deadline applies for institutional and retail holders.

Results will be announced on Nov. 22.

Settlement is slated for Nov. 30.

There is also an expiration deadline at 8 a.m. ET on Dec. 9 for retail holders only. The offeror will announce on Dec. 10 its decision on whether to accept tenders submitted after the general expiration deadline and prior to the retail-only deadline. If those tenders are accepted, settlement will occur on Dec. 15.

Lucid Issuer Services is also information agent for the sterling tender offers, and Equiniti Ltd. is receiving agent.

Credit Suisse International (+44 20 7883 8763, liability.management@credit-suisse.com), Lloyds Bank Corporate Markets plc (+44 20 7158 1726 / 1719, liability.management@lloydsbanking.com) and Merrill Lynch International (+44 20 7996 5420, DG.LM-EMEA@bofa.com) are dealer managers.

The retail and commercial bank is based in Edinburgh, U.K., with operational headquarters in London.

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