LYG Lloyds Banking Group Plc

TIDMLLOY

RNS Number : 4936N

Lloyds Banking Group PLC

29 January 2016

29 January 2016

LBG CAPITAL NO. 1 COMMENCES A TENDER OFFER FOR CERTAIN ENHANCED CAPITAL NOTES

LBG Capital No. 1 plc (the "Offeror"), an indirect wholly owned subsidiary of Lloyds Banking Group plc ("LBG"), is today announcing that it is commencing an offer (the "Tender Offer") to purchase for cash any and all of certain series of outstanding Enhanced Capital Notes issued by the Offeror and fully and unconditionally guaranteed by LBG.

Tender Offer

The Tender Offer is being made on the terms and subject to the conditions set out in the Offer to Purchase dated 29 January 2016 (the "Offer to Purchase"). Capitalized terms not otherwise defined in this announcement have the same meaning as in the Offer to Purchase.

The Tender Offer consists of offers to purchase for cash any and all of the outstanding:

-- 8.00% Fixed-to-Floating Rate Undated Enhanced Capital Notes issued by the Offeror and fully and unconditionally guaranteed by LBG (the "Series 1 ECNs"); and

-- 8.50% Fixed-to-Floating Rate Undated Enhanced Capital Notes issued by the Offeror and fully and unconditionally guaranteed by LBG (the "Series 2 ECNs" and, together with the Series 1 ECNs, the "ECNs").

Background to the Offer

In 2009, the Group undertook a significant capital raising exercise which included the issuance of approximately GBP8.4 billion of enhanced capital notes, including the ECNs. Approximately GBP3.3 billion in aggregate principal amount of these enhanced capital notes remain outstanding as at the date of this document.

The enhanced capital notes were issued for the purpose of counting as "stress test" core capital of the Group. Pursuant to the relevant terms and conditions of the ECNs (the "Conditions"), should any series of enhanced capital notes cease to be taken into account for the purposes of any "stress test" applied by the PRA in the circumstances more fully described in Condition 8(e) of the ECNs, the Offeror has the right, in certain circumstances and subject to various conditions as described in Condition 8(b) of the Conditions, to call the ECNs at par (the "Regulatory Call Right").

The ECNs were not taken into account as core capital for the most recent PRA stress tests, the results of which were published on December 16, 2014 and December 1, 2015. As confirmed by the Civil Division of the English Court of Appeal on December 10, 2015, a Capital Disqualification Event (as defined in the Conditions) has occurred and the Regulatory Call Right is available to each of the issuers of the enhanced capital notes. The ECN trustee has sought permission to appeal from the Supreme Court of the United Kingdom, which request for permission is currently pending.

The Offer

The Group is today launching the Offer and the Concurrent Non-U.S. Tender Offers (as defined below) (together, the "Tender Offers"). The Tender Offers provide eligible holders of the relevant series of enhanced capital notes (including the Holders of the ECNs) with a means to tender their enhanced capital notes at a price which is higher (or in the case of certain series of enhanced capital notes redeemable at a make-whole premium at a prices that is expected to be higher) than the contractual redemption price at which the relevant issuer of the enhanced capital notes is entitled to redeem such enhanced capital notes upon an exercise of the Regulatory Call Right.

Redemption

The issuers of the enhanced capital notes have today given redemption notices in respect of certain series of enhanced capital notes which are not the subject of the Tender Offers and which were prioritised for redemption following the liability management exercise conducted in 2014. Those redemptions are scheduled to occur on February 9, 2016.

Subject to the satisfaction of the conditions set out in Condition 8(b) of the ECNs, the Offeror will exercise the Regulatory Call Right and redeem any ECNs that are not validly tendered and accepted for purchase following completion of the Offer. See "Risk Factors - The Regulatory Call Right contained in the ECNs has been the subject of litigation; holders of ECNs need to carefully evaluate the risks and consequences of tendering, or refraining to tender, the ECNs in the Offer". The Group has received permission from the PRA, under Article 78 of the Capital Requirements Regulation (Regulation 575/2013/EU), for the redemption of all series of ECNs outstanding.

The table below sets forth certain information relating to the Tender Offer:

 
                                                          First 
                                                         Optional    Principal 
                                        Interest Rate      Call        Amount     Purchase 
       ECNs               ISIN                             Date      Outstanding   Price(1) 
-------------------  --------------  -----------------  ----------  ------------  --------- 
                                       8.00% to (but 
                                         excluding) 
    LBG Capital                        June 15, 2020. 
     No. 1 plc                           From (and 
       8.00%                             including) 
 Fixed-to-Floating                     June 15, 2020, 
    Rate Undated                        3-month U.S. 
  Enhanced Capital   XS0473106283       dollar LIBOR     June 15, 
       Notes          XS0471767276      plus 6.405%.       2020     $656,811,000  $1,020.00 
                                       8.50% to (but 
                                         excluding) 
                                        December 17, 
    LBG Capital                          2021. From 
     No. 1 plc                        (and including) 
       8.50%                            December 17, 
 Fixed-to-Floating                     2021, 3-month 
    Rate Undated                        U.S. dollar 
  Enhanced Capital   XS0473103348        LIBOR plus      December 
       Notes          XS0471770817        6.921%.        17, 2021   $276,658,000  $1,020.00 
 
   (1)     Per $1,000 in principal amount of ECNs accepted for purchase. 

Tender Consideration

Upon the terms and subject to the conditions set forth in the Offer to Purchase, for each $1,000 of the ECNs validly tendered and accepted for purchase pursuant to the Tender Offer, holders of a particular series will be eligible to receive a cash purchase price (the "Purchase Price") set out in the table above. In addition to the Purchase Price, holders whose ECNs are accepted for purchase will also receive accrued and unpaid interest on such ECNs (rounded to the nearest $0.01, with $0.005 being rounded upwards) from the last interest payment date up to, but not including, the Settlement Date (as defined below) (the "Accrued Interest").

Concurrent Non-U.S. Tender Offers

In conjunction with the Tender Offer, LBG today also announced that it is inviting holders of certain of its other enhanced capital notes denominated in pounds sterling and euros who are outside the United States to tender such securities for cash (the "Concurrent Non-U.S. Tender Offers"). Holders that are U.S. residents that hold any such securities may not tender such securities pursuant to the terms of the Concurrent Non-U.S. Tender Offers.

Tender Offer Conditions

The consummation of the Tender Offer is not conditioned upon any minimum amount of ECNs being tendered. However, the Tender Offer is subject to, and conditioned upon, the satisfaction or waiver of certain conditions described in the Offer to Purchase.

Withdrawal Rights

Validly tendered ECNs may be withdrawn at any time prior to the Expiration Deadline.

Tender Offer Period

The Tender Offer commenced today and will expire at 11:59 p.m., New York City time, on 2 March 2016, unless extended, re-opened or earlier terminated as provided in the Offer to Purchase. Assuming that the conditions to the Tender Offer are satisfied or waived, LBG expects that the Settlement Date will be 4 March 2016.

The relevant deadline set by the relevant Clearing System or any intermediary for the submission of Tender Instructions may be earlier than the deadlines set out herein.

Indicative Timetable

The following table sets out the expected dates and times of the key events relating to the Tender Offer. This is an indicative timetable and is subject to change.

 
              Events                     Dates and Times 
----------------------------------  ------------------------- 
 Commencement of the Tender 
  Offer 
 Tender Offer announced. Offer       29 January 2016 
  to Purchase made available 
  to holders of ECNs. 
 Withdrawal Deadline 
 The deadline for holders to         11:59 p.m., New York 
  validly withdraw tenders of         City time, on 2 March 
  ECNs.                               2016 
 Expiration Deadline 
 The deadline for receipt of         11:59 p.m., New York 
  all Tender Instructions.            City time, on 2 March 
                                      2016 
 Announcement of Tender Offer 
  Results 
 Announcement of the aggregate       As soon as reasonably 
  principal amounts of each           practicable on 3 March 
  series of ECNs which the Offeror    2016 
  will be accepting for purchase. 
 Settlement Date 
 Settlement Date of the Tender       Expected on 4 March 2016 
  Offer, including payment of 
  the purchase price and any 
  Accrued Interest in respect 
  of ECNs validly tendered and 
  accepted for purchase in the 
  Tender Offer. 
 

The times and dates above are subject, where applicable, to the right of LBG to extend, re-open, amend, limit, terminate or withdraw the Tender Offer, subject to applicable law. Accordingly, the actual timetable may differ significantly from the expected timetable set out above.

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