Osorio seeks to fill £15bn funding gap before auction

LLOYDS needs to find funding to fill a £15bn-£20bn black hole in the accounts of the 600 branches it is trying to sell off in the coming months, according to a source familiar with the situation.

New chief executive Antonio Horta-Osorio wants to move quickly to offload the branches, which the bank is required to sell due to an EU competition ruling.

But the sale will mean weaning them off the government’s Special Liquidity Scheme, which the overall Lloyds group still relies on for up to £51.6bn of its funding (as of December 2010).

The funding for the branches is likely to come in the form of a loan supplied in part by investment banks advising Lloyds on the deal, and in part from potential buyers or private equity backers.

Lloyds has not yet chosen an adviser, but Credit Suisse, Rothschild, Citigroup, UBS and JP Morgan are all thought to be vying for the deal.

The ability to line up funding will make a crucial difference to the attractiveness of the branches when Lloyds sends out a prospectus for the sale.

Potential bidders include Lord Leven’s investment vehicle NBNK, Virgin Money, National Australia Bank and private equity firm JC Flowers.

Lloyds declined to comment.