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Scottish foundation deprived of £2m from Lloyds rights issue

Finance | Gareth Jones | 28 Oct 2009

The Lloyds TSB Foundation for Scotland has claimed it should receive £2m compensation as its benefactor, the Lloyds Group, unlawfully excluded it from a rights issue in May this year.

The Foundation was excluded from participating in the £4bn issue because its 15.4 million shares are non-voting, but chief executive Mary Craig said she had received legal advice that this was incorrect.

“We began making contact with Lloyds Banking Group on 5 May 2009 when we asked if we would be eligible to take part in the rights issues. The response was, no we were not, that it was only for ordinary shareholders, and that as shareholders with limited voting rights we should have been excluded.”

“Our legal advice told us that we should have been included and we attempted again to have a substantive response from Lloyds Banking Group.

“Weeks passed and eventually the Lloyds Banking Group company secretary, Mike Hatcher, advised us that he was unaware of the outstanding issue and that he would look into it and come back within 24 hours.

“That didn’t happen, and there have been numerous letters and correspondence from us since then. I think there have been about 30 attempts now to get a substantive response from the bank and they have failed to give us one.”

Rumours of another rights issue

Craig added that she was putting the Foundation’s complaint into the public domain as she was concerned about rumours in the financial press that another Lloyds rights issue was imminent.

The Foundation’s legal council estimated that the funder had lost out on £2m as the offer entitled shareholders to subscribe to 0.62 shares for every one they owned, allowing it 9.5 million shares at 38.43p each.

As the joint book runners subsequently procured places for all non-accepted shares at 60p each, the Foundation missed out on being able to sell the 9.5 million shares at 21.57p more than it paid for them, amounting to £2m.

The Lloyds Group declined to comment on the claims.

The news comes just weeks after the Foundation revealed it may have to wind up its operations after its December grant round unless it can come to agreement with the Lloyds Group for future funding.

Earlier this month Alistair Carmichael, MP for Orkney & Shetland, tabled an Early Day Motion in the UK Parliament in protest. Two similar motions have now been put to the Scottish Parliament by Robert Brown, MSP for Glasgow, and Jackie Baillie, MSP for Dumbarton, with the latter obtaining 11 signatures.

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