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’s asset protection scheme (APS) before next week at the earliest, sources close to the talks say.
Speculation in the City has been rife that Lloyds will reach agreement on the planned exit this week, with a view to completing a £25bn fundraising exercise before the year is out.
But it is understood the proposals are still under intense discussion, meaning the Treasury will need at least another week to reach a decision.
Lloyds wants to raise between £12bn and £15bn in one of the biggest rights issues the City has ever seen. As part of the move, the government – which currently owns a 43 per cent stake – will have to stump up £5bn of the proceeds. Lloyds also plans to raise £10bn via other measures in order to fortify its balance sheet to the level required to exit the APS.
Under the original terms of Lloyds’ agreement to enter the scheme, the government would underwrite around £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’s stake to around 60 per cent, a move the bank’s directors are anxious to avoid at all costs.
Chancellor Alistair Darling is understood to be negotiating a “break fee” of between £1bn and £2bn for Lloyds’ APS exit, to reimburse the taxpayer for the indirect protection the bank has received since it signed up for the scheme in January.