SHARES in Lloyds Banking Group slumped yesterday as investors readied themselves for a possible £22bn-£25bn capital raising exercise that is likely to include a heavily discounted share issue.<br /><br />Lloyds shares closed the day down 7.2 per cent at 89.3p. <br /><br />Analysts said the discount on the share issue part of the financing could be as high as 40 to 50 per cent, depending on whether the government, which holds 43 per cent of the shares, is willing to take up its rights. <br /><br />There is also concern that the government may not wish to sub-underwrite the issue, which could affect confidence adversely. <br /><br />The rest of the refinancing is likely to consist of the conversion of up to £11bn of subordinated debt into equity. But the whole refinancing will only go ahead if the government and the Financial Services Authority (FSA) agrees to a plan that will see the bank avoid going into the state’s asset protection scheme.<br /><br />One version of the plan has already been turned down by the FSA.<br /><br />Lloyds declined to comment when contacted last night.