Hedgie calls on Lloyds to improve its capital base

A prominent hedge fund has called for Lloyds Banking Group to boost its capital by ditching its contingent convertible debt (cocos). Chris Hohn of the Children’s Investment Fund has written to the FSA to claim Lloyds’ cocos have too low a strike price, meaning the securities would not absorb losses until the bank was in severe financial trouble, and therefore should not count towards the bailed-out bank’s core capital. The activist hedge fund manager suggested that Lloyds should swap its so-called Enhanced Capital Notes for common equity, boosting its capital but diluting shareholders.