LLOYDS Banking Group yesterday said investors had heavily oversubscribed to its ground-breaking contingent convertible bond exchange plan, sending the stock 3.8 per cent higher and paving the way for a strong take-up for its upcoming rights issue.<br /><br />Lloyds, which said the result marked “an important milestone” in its capital-raising exercise, raised £8.5bn in its non-US bond exchange swap, of which the majority was in the form of the new “enhanced capital notes” (ECNs). It received offers from investors to exchange a total of £12.51bn in existing securities.<br /><br />The contingent convertibles – or “CoCos” – will revert automatically into shares if the bank’s core tier one capital ratio, a yardstick for its financial health, falls under five per cent.<br /><br />“Appetite for the stock is high,” said Evolution analyst Jaap Meijer. “Both elements of the swap were favourable – the coupon is attractive and investors are confident it is extremely unlikely that Lloyds will breach that five per cent core capital ratio.”<br /><br />Lloyds added that it had increased the maximum level of ECNs available to American investors from $800m (£482.2m) to $985.6m, after it said the separate US bond exchange plan had already received over $2.7bn of offers ahead of its 7 December deadline.<br /><br />The positive response was well-received by the City ahead of the pricing of Lloyds’ record £13.5bn rights issue today. The cash call is expected to be priced at around 33p.<br /><br /><strong>MATTHEW GREENBURGH<br />BANK OF AMERICA MERRILL LYNCH</strong><br /><br />THE man widely blamed for advising on the deal that brought the Royal Bank of Scotland to its knees appears to be clawing back his reputation.<br /><br />The Bank of America Merrill Lynch team headed by Greenburgh – the rainmaker responsible for advising Sir Fred Goodwin on RBS’s disastrous takeover of ABN Amro just before the economy went pear-shaped – has been credited in the City with thinking up Lloyds’ innovative take on the contingent convertible swap.<br /><br />Along with the bank’s head of EMEA liability management John Cavanagh, head of EMEA debt capital markets Amir Hoveyda, co-head of EMEA financial institutions capital markets Sid Prasad, and head of EMEA debt capital markets syndicate Jeff Tannenbaum, Greenburgh has scored a bit of a coup helping Lloyds get back onto firm financial footing. <br /><br />Although contingent convertibles have been around for a long time, the idea of using the core capital ratio as an equity conversion trigger is a novel one, and is expected to become a popular instrument at City banks.<br /><br />The other bank acting as joint global co-ordinator, sponsor, lead dealer manager and structuring adviser on the deal is UBS.