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Rating agency says Lloyds HBOS safer after bailout

Moody’s rating agency is confident that the £17bn Lloyds TSB HBOS bailout will protect against any further market downturns.

The rating agency says the bailout should provide a cushion against the anticipated losses and volatility relating to credit market exposures.

The bailout consists of £4.5bn of ordinary shares and £1bn of preference shares at Lloyds TSB and £8.5bn of ordinary shares and £3bn of preference shares at HBOS.

Moody’s is confident that the new capital levels of the banks are likely to limit any potential downward pressure on the ratings. But it says it will continue to monitor the group after it predicted downturns last month as a result of the merger.

It also expects the acquisition of HBOS to go ahead on the revised terms announced by Lloyds TSB today.

The Government is extending a guarantee on new CD, CP and senior unsecured bonds and notes issued by eligible UK banks and building societies within the next six months for a term of three years or less. Moody’s anticipates assigning backed short- and long-term ratings on such issuances in line with the rating of the Government and distinct from the unbacked short- and long-term debt ratings of Lloyds TSB and HBOS.

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