Lloyds close to agreeing break fee of 2.5bn

LLOYDS Banking Group and the Treasury are close to rubber-stamping a deal under which the bank will fork out a break fee of &pound;2.5bn to exit the government&rsquo;s asset protection scheme (APS).<br /><br />An announcement is expected possibly as early as tomorrow on the exact terms of Lloyds&rsquo; exit from the state-backed scheme, into which it had originally planned to place around &pound;260bn of potentially toxic loans in return for the government taking a higher stake in the bank.<br /><br />Under the terms of its exit deal, Lloyds will launch a &pound;20.5bn capital raising programme to bolster its balance sheet, including a &pound;13bn rights issue and &pound;7.5bn of contingent convertible bonds.<br /><br />Negotiations surrounding the fee Lloyds should pay for exiting the scheme have ranged from using the $425m (&pound;257.3m) paid by Bank of America to leave a US asset guarantee scheme as a benchmark, to a fee of more than ten times that sum. The Treasury is now close to getting its way, with a figure of &pound;2.5bn being touted as a near-final decision. <br /><br />Lloyds is working on ways of tempting bondholders to exchange their bonds for riskier investments convertible into equity.