UPDATE: Lloyds, RBS Asset Disposals May Land In Trustee Hands
05 November 2009 - 5:31AM
Dow Jones News
Lloyds Banking Group PLC (LYG), in a worst-case scenario, could
end up having to pay for the disposal of its retail banking assets
if it doesn't find a buyer within the four-year timeframe, it
disclosed in a prospectus.
"In particular, should the group fail to complete the disposal
of the retail banking business that the group expects to be
required to divest within four years, a divestiture trustee would
be appointed to conduct the sale, with a mandate to complete the
disposal with no minimum price (including at a negative price),"
Lloyds said under "risk factors" of its prospectus detailing plans
to raise money from shareholders.
A Royal Bank of Scotland Group PLC (RBS) spokesman also said a
trustee would be appointed to sell its assets "at any price" if the
bank isn't able make the disposals within a five-year
timeframe.
On Tuesday, Lloyds, 43%-government owned, unveiled a plan to
free itself from increased government assistance by raising GBP21
billion in fresh capital, instead of participating in an expensive
scheme to insure billions in toxic assets.
Lloyds also said it will have to sell more than 600 branches in
four years to satisfy the European Union over competition concerns
related to the government aid the bank received last year.
Meanwhile, 70%-government owned RBS is also being told by the EU
to divest from some businesses, including branches in Scotland, in
England and Wales, and the accounts of some small and midsize
business customers across the U.K., totaling about 2 million
customers and GBP20 billion in assets.
Banking and government officials have said they expect good
demand for the assets. The government hopes new market entrants
will snap up the assets, increasing competition in the sector.
In its prospectus, however, Lloyds warned that "there is no
assurance that the price that the group receives for any assets
sold pursuant to the restructuring plan will be at a level the
group considers adequate or which it could obtain in circumstances
in which the group was not required to sell such assets..."
A spokesman for Lloyds said a trustee, if needed, would be
nominated by the U.K. government for approval by the EU. Lloyds
declined to comment further.
The European Commission wasn't immediately available to
comment.
Analysts seemed divided on the level of interest for the assets
both Lloyds and RBS are selling.
"There will be plenty of potential buyers with new entrants such
as foreign banks, start-ups and private equity firms joining
existing players," said Neil Tomlinson, head of retail banking
consulting at Deloitte.
The list of potential bidders ranges from existing U.K. players
such as National Australia Bank (NAB.AU), owner of the Clydesdale
and Yorkshire Banks; Spain's Banco Santander SA (STD); and The
Co-operative Bank; new entrants like Virgin Group and Tesco PLC
(TSCO.LN); and a number of large European banks, including French
bank BNP Paribas SA (BNP) and Spain's Banco Bilbao Vizcaya
Argentaria SA (BBV).
Others analysts weren't so bullish, however.
"Branches are big on capex, small on margins, and with these
particular assets you don't even get a recognizable brand - well
not unless you are old enough to remember Williams & Glyn's,"
said Steve Cater, head of corporate banking for financial services
at PricewaterhouseCoopers.
The restructuring plans between the banks and the EU are pending
final approval by the European Commission, but that is largely
expected to happen within weeks.
RBS hasn't filed a prospectus because, as opposed to Lloyds, it
isn't raising capital independently, instead participating in a
revised government program to insure GBP280 billion in toxic assets
on its books.
-By Patricia Kowsmann, Dow Jones Newswires. Tel
+44(0)207-842-9295, patricia.kowsmann@dowjones.com
(Marietta Cauchi contributed to this article.)
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