4 March 2016
ENHANCED CAPITAL NOTES - COMPLETION OF TENDER OFFERS AND UPDATE ON REDEMPTION PROCESS
Further to the announcement dated 29 January 2016, Lloyds Banking Group (the Group) has now completed the concurrent Sterling, Euro and U.S. Dollar voluntary cash tender offers (Tender Offers) for certain series of the Enhanced Capital Notes (ECNs). The total aggregate principal amount of ECNs repurchased in the Tender Offers is c.870 million Sterling equivalent.
The Group has previously announced its intention to redeem all outstanding series of ECNs using the Regulatory Call Right (as defined in the Group's announcement of 29 January 2016) following the unanimous decision by the Court of Appeal on 10 December 2015 that a Capital Disqualification Event (CDE) has occurred. This process is expected to complete on 18 March 2016.
As disclosed in our 2015 full year results News Release, the estimated cost of these actions is expected to be £0.7 billion, representing the acceleration of the write off of the associated derivative asset and the cost of repaying the ECNs (through the Tender Offers or through redemption using the Regulatory Call Right). This cost will be taken outside of underlying profit in our first quarter 2016 results and will impact the Group's CET1 capital ratio by c.35bp in that quarter.
The Group is aware that the Trustee has been granted leave by the Supreme Court to appeal the Court of Appeal decision. In the event that the Supreme Court were to determine that a CDE had not occurred, the Group would compensate fairly the holders of the ECNs whose securities are redeemed using the Regulatory Call Right for losses suffered as a result of early redemption.
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For further information:
Investor Relations
Douglas Radcliffe +44 (0) 20 7356 1571
Group Investor Relations Director
Corporate Affairs
Matt Smith +44 (0) 20 7356 3522
Head of Corporate Media
FORWARD LOOKING STATEMENTS
This document contains certain forward looking statements with respect to the business, strategy and plans of Lloyds Banking Group and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, including statements about Lloyds Banking Group's or its directors' and/or management's beliefs and expectations, are forward looking statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend upon circumstances that will or may occur in the future. Factors that could cause actual business, strategy, plans and/or results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements made by the Group or on its behalf include, but are not limited to: general economic and business conditions in the UK and internationally; market related trends and developments; fluctuations in exchange rates, stock markets and currencies; the ability to access sufficient sources of capital, liquidity and funding when required; changes to the Group's credit ratings; the ability to derive cost savings; changing customer behaviour including consumer spending, saving and borrowing habits; changes to borrower or counterparty credit quality; instability in the global financial markets, including Eurozone instability, the potential for one or more countries to exit the Eurozone or European Union (EU) (including the UK as a result of a referendum on its EU membership) and the impact of any sovereign credit rating downgrade or other sovereign financial issues; technological changes and risks to cyber security; natural, pandemic and other disasters, adverse weather and similar contingencies outside the Group's control; inadequate or failed internal or external processes or systems; acts of war, other acts of hostility, terrorist acts and responses to those acts, geopolitical, pandemic or other such events; changes in laws, regulations, accounting standards or taxation, including as a result of further Scottish devolution; changes to regulatory capital or liquidity requirements and similar contingencies outside the Group's control; the policies, decisions and actions of governmental or regulatory authorities or courts in the UK, the EU, the US or elsewhere including the implementation and interpretation of key legislation and regulation; the ability to attract and retain senior management and other employees; requirements or limitations imposed on the Group as a result of HM Treasury's investment in the Group; actions or omissions by the Group's directors, management or employees including industrial action; changes to the Group's post-retirement defined benefit scheme obligations; the provision of banking operations services to TSB Banking Group plc; the extent of any future impairment charges or write-downs caused by, but not limited to, depressed asset valuations, market disruptions and illiquid markets; the value and effectiveness of any credit protection purchased by the Group; the inability to hedge certain risks economically; the adequacy of loss reserves; the actions of competitors, including non-bank financial services and lending companies; and exposure to regulatory or competition scrutiny, legal, regulatory or competition proceedings, investigations or complaints. Please refer to the latest Annual Report on Form 20-F filed with the US Securities and Exchange Commission for a discussion of certain factors together with examples of forward looking statements. Except as required by any applicable law or regulation, the forward looking statements contained in this document are made as of today's date, and Lloyds Banking Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements.