Lloyds bank in dispute with the Treasury
As we approach D-Day for the Lloyds bank rights issue, it would appear that the company is currently in dispute with the Treasury over the its participation in the government's asset protection scheme. The whole point of the proposed £25 billion pounds rights issue is so that the company can improve its balance sheet and also protect the assets which were going to be injected into the asset protection scheme. So what has happened?
It appears that the Treasury believes that Lloyds bank, which had originally agreed to join the scheme, will need to pay a break fee which will run into hundreds of millions of pounds to terminate the earlier agreement. Lloyds bank does not believe that such a payment should be forthcoming and is currently in dispute with the government on this issue. However, Lloyds bank is well aware that without the say-so of the authorities and the regulators the company will not be able to withdraw from the scheme and will in fact have to issue more shares in lieu of payment of premiums to the government.
The situation is most certainly coming to a head and we should have more information next week as to the future path the company will take.
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