LLOYDS Banking Group has raised £170m through a new share issue as it looks to keep debtholders on its side.
The money will be used to restart dividend payments on certain bonds, a practice that was suspended by the European Commission following the taxpayer bailout of the bank during the 2008 financial crisis.
Lloyds, which is partly owned by the government, said it had issued 479.3m new shares at a subscription price of 35.47 pence per share.
Lloyds said the share issue would have a neutral effect on its capital position, and analysts said the move had been expected given its intention to restart coupon payments on bonds issued before the credit crunch.
Michael Symonds, a credit analyst at Daiwa Capital Markets, said the deal made sense for Lloyds, allowing it to pay bondholders without depleting its capital position.
“Lloyds is raising equity to pay these coupons, as opposed to using cash, to neutralise the impact on its capital ratios. This looks like a prudent step given the current focus of investors and regulators on capital preservation,” he said.
The bank’s shares closed down 1.6 per cent at 35.6p – well below the average 63p price at which the British taxpayer acquired its stake in the bank.
Last month Lloyds reported a £3.5bn loss for 2011, with its earnings dragged down by a £3.2bn hit to compensate customers for the mis-selling of payment protection insurance.