Lloyds bank fund raising in the final straight
The Lloyds bank £4 billion rights issue is due to close this week amid signs that there is demand at these relatively low levels. However, each and every investor given the opportunity to acquire further shares at 38.43 pence against the current price of 69 pence should obviously take professional investment advice before deciding either way.
Many hope this is the final hurdle in the groups attempt to escape from the terrible HBOS merger which has ruined shareholder value and brought the company to its knees. The £4 billion of additional capital will be used to shore up the company's balance sheet and while it looks as though the issue should go fairly smoothly, with institutions set to take up any remaining rights issue shares, nobody knows if this is the bottom of the banking sector cycle.
Initially there had been fears that the government would be left with any rights shares not taken up but due to the difference in prices it would appear there is demand there and the government should not have to increase its stake due to the underwriting process. However, the UK government will have a problem at some stage with significant stakes in Lloyds, Royal Bank of Scotland and full ownership of Northern Rock to be sold on in the future.
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