Investors criticize Lloyds rights issue plans

11 August 2009

The proposed rights issue involving Lloyds Banking Group has been met with skepticism among some investors.

It had been suggested earlier this week that the bank could issue around $25 billion in new shares as part of a move to limit its participation in the government's asset protection scheme (APS).

However, doubts over the validity of the idea have been raised by some of the financial institution's largest shareholders, with one, who declined to be named, telling Reuters: "We really don't see how this could be made to work".

"I also think it would be quite surprising if there is that much appetite for Lloyd's stock," the top-ten shareholder added.

Shares in Lloyds fell yesterday following the news, dropping four per cent to $1.59 at 16:16 BST in London.

It is believed that chief executive Eric Daniels believes the fees associated with taking part in the APS - which are around $26 billion - are too high.

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