Lloyds deal to exit APS hits further delay

LLOYDS Banking Group will not be able to thrash out a deal with the Treasury to allow it to exit the government&rsquo;s asset protection scheme (APS) before next week at the earliest, sources close to the talks say.<br /><br />Speculation in the City has been rife that Lloyds will reach agreement on the planned exit this week, with a view to completing a &pound;25bn fundraising exercise before the year is out.<br /><br />But it is understood the proposals are still under intense discussion, meaning the Treasury will need at least another week to reach a decision.<br /><br />Lloyds wants to raise between &pound;12bn and &pound;15bn in one of the biggest rights issues the City has ever seen. As part of the move, the government &ndash; which currently owns a 43 per cent stake &ndash; will have to stump up &pound;5bn of the proceeds. Lloyds also plans to raise &pound;10bn via other measures in order to fortify its balance sheet to the level required to exit the APS.<br /><br />Under the original terms of Lloyds&rsquo; agreement to enter the scheme, the government would underwrite around &pound;260bn of potentially toxic loans and assets in return for a higher stake in the bank. The arrangement, if it goes ahead, will boost the government&rsquo;s stake to around 60 per cent, a move the bank&rsquo;s directors are anxious to avoid at all costs.<br /><br />Chancellor Alistair Darling is understood to be negotiating a &ldquo;break fee&rdquo; of between &pound;1bn and &pound;2bn for Lloyds&rsquo; APS exit, to reimburse the taxpayer for the indirect protection the bank has received since it signed up for the scheme in January.