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Chancellor to give Lloyds green light for rights issue

Chancellor Alistair Darling is expected to give Lloyds Banking Group the green light to market test its plans for a £25bn refinancing, according to the Financial Times today.

The move signals that the Chancellor is willing to release Lloyds from the Government’s asset protection scheme.

Lloyds is planning to raise money through a combination of a rights issue of £11bn to £15bn and the conversion of around £10bn of existing debt into instruments convertible into equity.

The Chancellor is expected to tell the bank in the next week that it can test the market by appointing underwriters, but he will be able to withdraw his approval for the plan if he believes it is too risky.

If the plans go ahead, the Government will have to give Lloyds a further £5bn-£7bn of taxpayer money as part of the rights issue in order to maintain its 43.5 per cent stake in the bank.

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