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I am taking a quick break from my Bradford & Bingley work this morning to provide a quick update on the Lloyds Exchange Offer. My attempts to obtain an equitable outcome for the many Loyds retail investors who have been so badly treated have been quietly rumbling on. Below is a copy of the latest 'defence' I have received from Michael Oliver (Lloyds Director of Investor relations). The following are my brief comments on the main points covered in his e-mail:
1. Certificated holders who have had their Exchange Offer Instruction forms rejected by Lloyds
In my opinion Lloyds are acting disgracefully in refusing to accept any responsibility for or take any remedial action on the many instances of certificated retail investors who have had their forms rejected because they did not have a Euroclear / Clearstream account number. I have discussed this issue with brokers, financial advisers and financial journalists and Lloyds are in a minority of one in believing that they have acted correctly on this. I will continue to push for a better outcome and would encourage all those affected to continue to complain and to also lodge complaints with the FSA and FOS.
2. Tax Status of ECN's
As you will see Lloyds are not going to obtain an opinion from HMRC on the tax status of the ECN's and, in particular, whether they are Qualifying Corporate Bonds (QCB's) and which issues, if any, will be classed as Deeply Discounted Securities (DDS's). However, all is not lost because a 'white knight' has come to the rescue in doing what Lloyds should and could have done themselves. I cannot disclose the information at this stage because I am awaiting permission to do so but hope to be able to provide some useful answers soon.
3. Possibility of further Exchange Offer
As you will read below Michael Oliver appears to be pouring cold water on this the possibility of Lloyds making a further Exchange Offer before the EC Coupon / Redemption period kicks in on 31 January 2010. This is obviously very disappointing. The reason given that they do not have capacity to make a further Offer seems weak in light of the private offers they are recently agreed with large US investors, the published prospectus for a further £5 billion of ECN's and the fact that acceptances under the Retail Holdings Offer have cost under £10 million see ( http://www.investegate.co.uk/Article.aspx?id=201001190700077502F ) compared to the £100 million available.
Copy of e-mail from Michael Oliver:
Dear Mr Taber,
Further to your recent email, I have attempted to pull together responses to your various outstanding queries. It is perhaps worth reiterating at the outset that we believe that the Group has done as much as was practicable and reasonable to facilitate the participation of all holders in the Exchange Offer and to treat all holders equitably. On the issue of communicating with certificated holders, our covering letter was clear that holders of securities wishing to participate in the Exchange Offer "must first obtain, and read in full a copy of the Exchange Offer Memorandum" (EOM). This Exchange Offer Memorandum states clearly, in bold, on page 3 - "Holders will not be able to receive any ECNs, or, in the applicable limited circumstances, Additional ECNs to which they may become entitled pursuant to the Exchange Offer unless they have access to a securities account with Euroclear or Clearstream, Luxembourg. Holders who do not have such access and who wish to participate in the Exchange Offer should contact their broker, financial adviser, dealer, bank, custodian, trust company or other nominee as soon as possible to arrange access to an account at either Euroclear or Clearstream, Luxembourg, or contact the Exchange Agent for further information." In addition the Non-Crest Exchange Instruction Form further clarified that "Holders of Existing Securities who are not direct participants in Euroclear Bank or Clearstream, Luxemburg should contact their broker, financial adviser, dealer, bank, custodian, trust company or other nominee to arrange access to an account at either Euroclear bank or Clearstream, Luxembourg so that they may complete this section and take delivery of the ECNs." You asked why certificated holders were not advised of the CDI solution. The CDI solution related to holders in CREST rather than certificated shareholders and we therefore communicated this via the CREST Bulletin Board. It was not appropriate to send this to non-CREST holders. With regard to our December announcements that related to US$ preference shares. These reflected a small number of bilateral arrangements agreed following the Exchange Offers with preference shareholders who, for jurisdictional purposes, were excluded from the two public Exchange Offers. As I mentioned to you in earlier correspondence, we have been in contact with HMRC to discuss the issue of a COP-10 ruling on the taxation status of the new ECNs. They concurred with our initial view that such an enquiry would have been, and remains, unlikely to meet the COP-10 criteria and that it is not possible for HMRC to give a general response. Turning to your point about our website. On the Debt Investor Relations web pages you can find detailed information on our outstanding capital securities and preference shares, as well as the Group's securitisation programmes. The preference share disclosures do indicate dividend payment dates but we are unable to put generic ex-dividend dates on the website as these are only agreed on an individual basis shortly before the payment of individual dividend payments. We do of course keep our disclosures under review and always welcome feedback with regard to how further improvements may be made. I believe I have covered your outstanding issues but perhaps I could just reiterate a couple of points. Our ability to issue Enhanced Capital Notes (ECNs) is not unlimited. We need to abide by a number of capital regulations and regulatory caps - as well as the limits of the authorities granted by our ordinary shareholders - which we believe precludes our ability to issue further capital qualifying ECNs at this time. We simply are not in the position of having an unlimited issuance ceiling in this regard. Our Exchange Offer Memorandum (EOM) was prepared to the standard mandated by the EU Prospectus Directive for retail offers and was approved by the UKLA as such. The EOM and the Non-Crest Exchange Instruction Form clearly stated that holders needed to have access to a securities account with Euroclear or Clearstream to be able to receive any ECNs, and that they should seek advice from, amongst others, their broker or financial advisor if they did not have such access. I hope this clarifies the position. Regards Michael D. Oliver Director of Investor Relations |
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Lloyds Exchange Offer Sagaposted 20 Jan 2010 02:10 by Mark Taber |
