Lloyds Banking Group PLC Subordinated Debt Securities & Exchange Offer (6406G)

TIDMLLOY

RNS Number : 6406G

Lloyds Banking Group PLC

23 November 2015

News Release

23 November 2015

NOT FOR DISTRIBUTION IN ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION. THE EXCHANGE OFFER IS AVAILABLE only TO (1) QUALIFIED INSTITUTIONAL BUYERS in a private transaction in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) thereof and (2) outside the United States, to persons other than "U.S. persons" as defined in Rule 902 under the Securities Act in offshore transactions in compliance with Regulation S under the Securities Act. THE EXCHANGE OFFER IS MADE SUBJECT TO OFFER RESTRICTIONS IN CERTAIN JURISDICTIONS (SEE "OFFER RESTRICTIONS" BELOW).

LLOYDS BANKING GROUP PLC ANNOUNCES AN OFFERING OF SUBORDINATED DEBT SECURITIES AND ITS INTENTION TO COMMENCE AN EXCHANGE OFFER

Lloyds Banking Group plc ("LBG") announces an offering for cash of new Tier 2 subordinated debt securities and its intention to commence later today an offer to certain eligible holders to exchange specified series of outstanding subordinated debt securities issued by HBOS plc and Lloyds Bank plc, wholly-owned subsidiaries of LBG, for LBG's Tier 2 subordinated debt securities set out in the table below (the "Exchange Offer").

The proposed Exchange Offer provides LBG with an opportunity to further enhance the quality of its capital base.

The Private Offering

LBG has launched an offering for cash of new subordinated debt securities due 2045 (the "2045 Original Notes"). The 2045 Original Notes are expected to be priced later today and issued on 1 December 2015. The 2045 New Notes (as defined below) offered in the Exchange Offer will constitute a further issuance of, will form a single series with, and have the same CUSIP numbers as the 2045 Original Notes.

Exchange Offer

The Exchange Offer will be made on the terms and subject to the conditions to be set out in an Exchange Offer Memorandum expected to be available later today (the "Exchange Offer Memorandum"). Capitalized terms not otherwise defined in this announcement have the same meaning as in the Exchange Offer Memorandum.

The Exchange Offer is expected to consist of:

-- an offer to exchange 6.50% Fixed Rate Lower Tier 2 Notes due 2020 issued by Lloyds Bank plc and guaranteed by LBG (the "2020 Old Notes") for Subordinated Debt Securities due 2025 issued by LBG (the "2025 New Notes") (the "2025 Exchange Offer"); and

-- an offer to exchange 6.00% Subordinated Notes due 2033 issued by HBOS plc (the "2033 Old Notes") for Subordinated Debt Securities due 2045 (the "2045 New Notes") issued by LBG (the "2045 Exchange Offer").

The 2020 Old Notes and the 2033 Old Notes are together referred to as the "Old Notes". The 2025 New Notes and the 2045 New Notes are together referred to as the "New Notes".

The table below sets forth certain information relating to the 2025 Exchange Offer:

 
                               Principal      Reference     Bloomberg    2020 Old Notes  2025 New Notes      Early 
                                 Amount        Treasury     Reference     Fixed Spread    Fixed Spread   Participation 
 Old Notes        CUSIP       Outstanding      Security        Page      (basis points)  (basis points)   Payment(1) 
------------  -------------  --------------  ------------  ------------  --------------  --------------  ------------- 
Lloyds Bank 
  plc 6.50% 
 Fixed Rate 
 Lower Tier                                   1.375% due 
 2 Notes due    53947NAA2                     31 October 
    2020        53947QAA5    $2,000,000,000      2020          PX1            100             235             $50 
 
   (1)    Per $1,000 principal amount of 2020 Old Notes accepted for exchange. 

The table below sets forth certain information relating to the 2045 Exchange Offer:

 
                                  Principal    Reference   Bloomberg  2033 Old Notes   2045 New Notes        Early 
                                    Amount      Treasury   Reference   Fixed Spread     Fixed Spread     Participation 
     Old Notes         CUSIP     Outstanding    Security     Page     (basis points)  (basis points)(1)   Payment(2) 
-------------------  ----------  ------------  ----------  ---------  --------------  -----------------  ------------- 
  HBOS plc 6.00%                               2.875% due 
 Subordinated Notes  4041A2AF1                 15 August 
      due 2033        4041A3AG7  $750,000,000     2045        PX1          180               N/A              $50 
 

(1) The 2045 New Notes fixed spread is expected to be equal to the spread at which the 2045 Original Notes will be priced.

   (2)    Per $1,000 principal amount of 2033 Old Notes accepted for exchange. 

Total Exchange Consideration; Exchange Consideration

Upon the terms and subject to the conditions to be set forth in the Exchange Offer Memorandum, holders who validly tender and who do not validly withdraw Old Notes at or prior to the Early Participation Date, and whose tenders are accepted for exchange by LBG, will receive the applicable Total Exchange Consideration for each $1,000 principal amount of Old Notes. The Exchange Consideration for each $1,000 principal amount of Old Notes tendered after the Early Participation Date but at or prior to the Expiration Deadline will be the Total Exchange Consideration less the applicable Early Participation Payment.

2025 Exchange Offer

The Total Exchange Consideration in the 2025 Exchange Offer will be based on the fixed spread for the 2020 Old Notes to the yield on the applicable Reference U.S. Treasury Security as of 11:00 a.m., New York City time, on 8 December 2015.

The 2025 New Notes will mature on 10 December 2025 and will bear interest at a rate per annum (the "2025 Notes Coupon") equal to the sum of (a) the bid-side yield on the 2.25% U.S. Treasury Security due 15 November 2025 (the "2025 New Notes Reference Security"), as calculated by the Dealer Managers in accordance with standard market practice, that equates to the bid-side price of the 2025 New Notes Reference Security, as of 11:00 a.m., New York City time, on 8 December 2015, as displayed on the Bloomberg Reference page PX1 (or any recognized quotation source selected by the Dealer Managers if such quotation report is not available or manifestly erroneous) plus (b) a fixed spread of 235 basis points, such sum rounded to the third decimal place when expressed as a percentage.

2045 Exchange Offer

The Total Exchange Consideration in the 2045 Exchange Offer will be based on the fixed spread for the 2033 Old Notes to the yield on the applicable Reference U.S. Treasury Security for that series as of 11:00 a.m., New York City time, on 8 December 2015.

The 2045 New Notes offered in the 2045 Exchange Offer will constitute a further issuance of, will form a single series with, and have the same CUSIP numbers as the 2045 Original Notes.

The 2045 New Notes will mature on 1 December 2045. The 2045 New Notes Value will be equal to the discounted value on the Early Settlement Date of the remaining payments of principal and interest (excluding accrued and unpaid interest to but not including the Early Settlement Date) per $1,000 principal amount of the 2045 New Notes through the maturity date of the 2045 New Notes, using a yield equal to the sum, as calculated by the Dealer Managers, of (a) the bid-side yield on the 2.875% U.S. Treasury Security due 15 August 2045, as of 11:00 a.m., New York City time, on 8 December 2015, as displayed on the Bloomberg Reference page PX1 (or any recognized quotation source selected by the Dealer Managers if such quotation report is not available or manifestly erroneous) plus (b) a fixed spread, which is expected to be equal to the spread at which the Original 2045 Notes will be priced. The 2045 New Notes Value will be rounded to the nearest cent per $1,000 principal amount of 2045 New Notes.

The 2045 New Notes Exchange Ratio will be equal to (1) the Total Exchange Consideration or the Exchange Consideration, as the case may be, divided by (2) the 2045 New Notes Value multiplied by (3) $1,000. Such amount will represent the aggregate principal amount of 2045 New Notes a holder would be entitled to receive for each $1,000 of 2033 Old Notes tendered in the 2045 Exchange Offer and accepted by LBG.

As the 2045 New Notes Exchange Ratio will be calculated by reference to the Total Exchange Consideration or the Exchange Consideration, as applicable, the 2045 New Notes Exchange Ratio will differ for holders tendering Old Notes (i) at or prior to the Early Participation Date and (ii) after the Early Participation Date but at or prior to the Expiration Deadline.

Early Participation

In order to encourage holders to tender early, for each $1,000 principal amount of the Old Notes validly tendered on or before the Early Participation Date and not validly withdrawn, holders will be eligible to receive the applicable Exchange Consideration and the applicable Early Participation Payment set out in the table above. Holders who validly tender their Old Notes after the Early Participation Date but at or prior to the Expiration Deadline, will only be eligible to receive the applicable Exchange Consideration, which does not include the Early Participation Amount.

Exchange Offer Conditions

Consummation of the Exchange Offer will be subject to a number of conditions, including a Minimum New Issue Size Condition and a Tax Fungibility Condition, which will be described in more detail in the Exchange Offer Memorandum.

Withdrawal Rights

Validly tendered Old Notes may be withdrawn at any time before 5:00 p.m., New York City time, on 7 December 2015 (the "Withdrawal Deadline"), but not thereafter. LBG may extend or otherwise amend the Early Participation Date or the Expiration Deadline or increase the amount of Old Notes sought in the Exchange Offer without extending the Withdrawal Deadline or otherwise reinstating withdrawal rights, except as required by law.

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November 23, 2015 08:54 ET (13:54 GMT)