ECN Exchange Offer Non-US

RNS Number : 6866B

Lloyds Banking Group PLC

06 March 2014

 



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION TO ANY U.S. PERSON OR TO ANY PERSON LOCATED OR RESIDENT IN THE UNITED STATES OR INTO THE UNITED STATES, ITS TERRITORIES AND POSSESSIONS (INCLUDING PUERTO RICO, THE U.S. VIRGIN ISLANDS, GUAM, AMERICAN SAMOA, WAKE ISLAND AND THE NORTHERN MARIANA ISLANDS), ANY STATE OF THE UNITED STATES OR THE DISTRICT OF COLUMBIA OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT (SEE "OFFER RESTRICTIONS" BELOW)

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6 March 2014

LBG CAPITAL NO.1 PLC AND LBG CAPITAL NO.2 PLC

ANNOUNCE INVITATIONs TO EXCHANGE CERTAIN OF THEIR EURO AND STERLING DENOMINATED ENHANCED CAPITAL NOTES ("EXISTING NOTES") FOR SPECIFIED SERIES OF ADDITIONAL TIER 1 SECURITIES ("ADDITIONAL TIER 1 SECURITIES") TO BE ISSUED BY LLOYDS BANKING GROUP PLC ("LBG")

LBG Capital No. 1 plc ("LBG 1") and  LBG Capital No. 2 plc ("LBG 2", together with LBG 1, the "Offerors" and each an "Offeror") have today invited all Holders (subject to the Offer Restrictions referred to below) of:

(i)    Euro Existing Notes set out under the heading "Euro PNC6 Exchange Offer Existing Notes" below to Offer to Exchange such Euro Existing Notes, which are outstanding, for up to €750,000,000 Euro Additional Tier 1 Securities (the "Euro PNC6 Exchange Offer");

(ii)   Sterling Existing Notes set out under the heading "Sterling PNC5 Exchange Offer Existing Notes" below to Offer to Exchange such Sterling Existing Notes, which are outstanding, for up to £1,250,000,000 Sterling PNC5 Additional Tier 1 Securities (the "Sterling PNC5 Exchange Offer");

(iii)  Sterling Existing Notes set out under the heading "Sterling PNC9 Exchange Offer Existing Notes" below to Offer to Exchange such Sterling Existing Notes, which are outstanding, for up to £1,250,000,000 Sterling PNC9 Additional Tier 1 Securities (the "Sterling PNC9 Exchange Offer"); and

(iv)   Sterling Existing Notes set out under the heading "Sterling PNC15 Exchange Offer Existing Notes" below to Offer to Exchange such Sterling Existing Notes, which are outstanding, for up to £750,000,000 Sterling PNC15 Additional Tier 1 Securities (the "Sterling PNC15 Exchange Offer"),

(each an "Exchange Offer" and together, the "Exchange Offers"), on the terms and subject to conditions set out in the Exchange Offer Memorandum dated 6 March 2014 (the "Exchange Offer Memorandum").

Copies of the Exchange Offer Memorandum are available from the Exchange Agent as set out below. Capitalised terms used in this announcement but not defined herein have the meanings given to them in the Exchange Offer Memorandum.

RATIONALE

In 2009, the Lloyds Banking Group (the "Group") undertook a significant capital raising exercise in order to reinforce the Group's going-concern capital ratios and to meet the FSA's stress test requirements.  As a component of the exercise, the Group issued 33 series of ECNs, with a nominal amount of £8.4bn currently outstanding.

The terms and conditions of the ECNs include a Regulatory Call Right (as defined below) should, amongst other things, the ECNs cease to be taken into account for the purposes of any "stress test" applied by the PRA (successor to the FSA) in respect of core capital. Whilst still uncertain, management of Lloyds Banking Group plc believes recent developments resulting in higher capital requirements for banks, including a changed definition of core capital, make it likely that the ECNs will not provide going concern benefit under future stress tests.

These recent developments include:

•           a requirement in the CRR that with effect from 1 January 2014 convertible Additional Tier 1 ("AT1") capital instruments should have a conversion trigger set at no less than 5.125 per cent. CET1 Ratio ("CET1 Ratio" means the ratio of a firm's common equity tier 1 capital to its risk weighted assets, and calculated in accordance with the end-point requirements of CRD IV);

•           statements by the PRA in late 2013 that a conversion trigger of 5.125 per cent. CET1 Ratio may not convert in time to prevent the failure of a firm and that it expects major UK firms to meet a 7 per cent. CET1 Ratio determined in accordance with the end-point requirements of CRD IV;

•           a statement by the EBA in January 2014 that tier 2 instruments must have a conversion trigger above a 5.5 per cent. CET1 Ratio to be recognised in its forthcoming stress tests; and

•           an announcement by the PRA that, following a consultation commenced in October 2013, it expects to revise stress testing methodology and pass marks in 2014.

As a result of differences in definition, the Group's CET1 Ratio is substantially lower than the core tier 1 ratio on which the conversion trigger of the ECNs is based. As at 31 December 2013, the difference was 4.0 per cent. Applying the same difference to the 5.0 per cent. core tier 1 ratio used as the ECN conversion trigger gives a 1.0 per cent. CET1 Ratio determined in accordance with end-point requirements of CRD IV, well below the CRR minimum requirements.

The Group is today launching prioritised exchange offers to eligible holders of ECNs to exchange their ECNs for new AT1 securities at a price consistent with current trading prices. The offers provide eligible holders with a means to eliminate the uncertainty around the Regulatory Call Right in the ECNs. In addition, such exchange offers are expected to result in sufficient AT1 securities being issued to meet the Group's medium-term AT1 target.

Regulatory Calls of Existing Notes

Pursuant to the terms and conditions of the Existing Notes, should any Series of Existing Notes cease to qualify for inclusion in the lower tier 2 capital of the Group or, as a result of changes to the Regulatory Capital Requirements (as defined in the terms and conditions of the Existing Notes) or the interpretation or application thereof by the PRA, cease to be taken into account for the purposes of any "stress test" applied by the PRA, in each case as more fully described in condition 8(e) of the terms and conditions of the relevant Existing Notes, the issuer of the relevant Series of Existing Notes has the right, which is subject to various conditions as described in condition 8(b) of the terms and conditions of the relevant Existing Notes, to call such Series (the "Regulatory Call Right").

There can be no assurance that the Existing Notes will continue to count for the purposes of "stress tests" to be applied by the PRA to the Group.

For most Series of Existing Notes, the relevant Regulatory Call Price (being par or the applicable Make Whole Redemption Price (as defined in the terms and conditions of the relevant Existing Notes), as the case may be, together with accrued but unpaid interest) is substantially lower than the Exchange Price pursuant to the relevant Exchange Offer.

The Regulatory Call Right applies to each separate Series of Existing Notes and, where available, the relevant Offeror may choose which individual Series to call.

If the Regulatory Call Right were, by its terms, ever to become exercisable and the relevant Offeror wished to make use of it, LBG and the Offerors currently intend that they would prioritise the redemption of those Series of Existing Notes some part of which Series is accepted for exchange in one of the Exchange Offers and (if such Series is subject to the Retail Holdings Offer) accepted for purchase in the Retail Holdings Offer, or which rank in the relevant Exchange Priority or (if such Series is subject to the Retail Holdings Offer) the tender priority pursuant to such Retail Holdings Offer, ahead of those Series of Existing Notes which have been so accepted for exchange or purchase except if the relevant Series of Existing Notes is pro-rated by the relevant Offeror pursuant to the relevant Exchange Offer.

Concurrently with the Exchange Offers, LBG 1 and LBG 2 are inviting holders of certain of their U.S. dollar denominated ECNs to exchange such securities pursuant to the Global U.S. Dollar Exchange Offer (as defined in the Exchange Offer Memorandum). Further, LBG 1 and LBG 2 are inviting certain eligible retail holders of their sterling denominated Existing Notes to sell such securities to LBG 1 or LBG 2 (as applicable) for cash pursuant to the Retail Holdings Offer (as defined in the Exchange Offer Memorandum). Only the Exchange Offers are being made by means of the Exchange Offer Memorandum. Documentation in relation to the Global U.S. Dollar Exchange Offer and the Retail Holdings Offer will be or has been published separately.

THE EXCHANGE OFFER

The Existing Notes

The tables below identify the Series of Existing Notes which are subject to the Exchange Offers and the Exchange Priority for each Exchange Offer.

The euro denominated Existing Notes set out under the heading "Euro PNC6 Exchange Offer Existing Notes" below, the sterling denominated Existing Notes set out under the heading "Sterling PNC5 Exchange Offer Existing Notes" below, the sterling denominated Existing Notes set out under the heading "Sterling PNC9 Exchange Offer Existing Notes" below and the sterling denominated Existing Notes set out under the heading "Sterling PNC15 Exchange Offer Existing Notes" below, together, comprise the "Existing Notes".

Holders may only Offer to Exchange their Existing Notes for the Series of Additional Tier 1 Securities specified in the column of the relevant table headed "Eligible Series of Additional Tier 1 Securities" in accordance with the relevant Exchange Price. The relevant Offeror will pay, or procure payment to, Holders, in respect of their Existing Notes which are accepted for exchange, an Accrued Interest Payment and a Cash Rounding Amount (if applicable) set out in the Exchange Offer Memorandum on the relevant Settlement Date.

Each of the Exchange Offers will be treated independently by the Offerors.

Euro PNC6 Exchange Offer Existing Notes

ISIN		Issuer / Guarantor(s)		Current Coupon		Amount Outstanding			Maturity Date		Exchange Price (%)		Eligible Series of Additional Tier 1 Securities		Acceptance Priority Level
XS0459088281		LBG Capital No.1 plc / Lloyds Banking Group plc		6.439%		€710,523,000			23 May 2020		105.50		Euro Additional Tier 1 Securities		1
XS0459088794		LBG Capital No.2 plc / Lloyds Bank plc		6.385%		€661,955,000			12 May 2020		105.50				2
XS0459091236		LBG Capital No.1 plc / Lloyds Banking Group plc		7.625%		€226,172,000			14 October 2020		106.50				3
XS0459087986		LBG Capital No.2 plc / Lloyds Bank plc		8.875%		€125,330,000			7 February 2020		110.50				4
XS0459090774		LBG Capital No.1 plc / Lloyds Banking Group plc		7.375%		€94,737,000			12 March 2020		106.00				5
XS0459090931		LBG Capital No.1 plc / Lloyds Banking Group plc		3 month EURIBOR +3.1% per annum Floating Rate		€53,040,000			12 March 2020		93.00				6
XS0459089412		LBG Capital No.2 plc / Lloyds Bank plc		15.000%		€486,527,000			21 December 2019		152.50				7

Sterling PNC5 Exchange Offer Existing Notes

ISIN		Issuer / Guarantor(s)		Current Coupon		Amount Outstanding			Maturity Date		Exchange Price (%)		Eligible Series of Additional Tier 1 Securities		Acceptance Priority Level
XS0459088877		LBG Capital No.1 plc / Lloyds Banking Group plc		11.040%		£736,211,000			19 March 2020		111.75		Sterling PNC5 Additional Tier 1 Securities		1
XS0459086749		LBG Capital No.1 plc / Lloyds Banking Group plc		7.8673%		£331,070,000			17 December 2019		106.50				2
XS0459088109		LBG Capital No.2 plc / Lloyds Bank plc		9.334%		£207,563,000			7 February 2020		108.00				3
XS0459091582		LBG Capital No.2 plc / Lloyds Bank plc		7.625%		£151,422,000			9 December 2019		105.50				4
XS0459091665		LBG Capital No.2 plc / Lloyds Bank plc		9.000%		£96,731,000			15 December 2019		107.00				5
XS0459091749		LBG Capital No.1 plc / Lloyds Banking Group plc		8.125%		£4,056,000			15 December 2019		104.00				6

Sterling PNC9 Exchange Offer Existing Notes

ISIN		Issuer / Guarantor(s)		Current Coupon		Amount Outstanding			Maturity Date		Exchange Price (%)		Eligible Series of Additional Tier 1 Securities		Acceptance Priority Level
XS0459086582		LBG Capital No.1 plc / Lloyds Banking Group plc		7.5884%		£732,276,000			12 May 2020		106.25		Sterling PNC9 Additional Tier 1 Securities		1
XS0459093364		LBG Capital No.1 plc / Lloyds Banking Group plc		7.869%		£596,665,000			25 August 2020		106.50				2
XS0459090188		LBG Capital No.2 plc / Lloyds Bank plc		9.125%		£147,591,000			15 July 2020		107.50				3
XS0459091079		LBG Capital No.2 plc / Lloyds Bank plc		12.750%		£57,230,000			10 August 2020		114.00				4
XS0459090691		LBG Capital No.2 plc / Lloyds Bank plc		11.125%		£38,589,000			4 November 2020		110.50				5

Sterling PNC15 Exchange Offer Existing Notes

ISIN		Issuer / Guarantor(s)		Current Coupon		Amount Outstanding			Maturity Date		Exchange Price (%)		Eligible Series of Additional Tier 1 Securities		Acceptance Priority Level
XS0459086822		LBG Capital No.1 plc / Lloyds Banking Group plc		7.975%		£102,050,932			15 September 2024		105.00		Sterling PNC15 Additional Tier 1 Securities		1
XS0459092390		LBG Capital No.2 plc / Lloyds Bank plc		11.250%		£95,100,000			14 September 2023		111.75				2
XS0459091822		LBG Capital No.2 plc / Lloyds Bank plc		14.500%		£79,450,000			30 January 2022		120.75				3
XS0459092473		LBG Capital No.2 plc / Lloyds Bank plc		10.500%		£68,740,000			29 September 2023		109.50				4
XS0459093281		LBG Capital No.2 plc / Lloyds Bank plc		16.125%		£61,350,000			10 December 2024		128.50				5
XS0459092127		LBG Capital No.2 plc / Lloyds Bank plc		9.875%		£57,390,000			10 February 2023		107.50				6
XS0459092556		LBG Capital No.2 plc / Lloyds Bank plc		11.875%		£35,274,000			1 September 2024		114.00				7
XS0459092804		LBG Capital No.2 plc / Lloyds Bank plc		9.000%		£107,439,000			15 July 2029		107.50				8
XS0459092986		LBG Capital No.2 plc / Lloyds Bank plc		8.500%		£104,316,000			7 June 2032		106.75				9
XS0459089255		LBG Capital No.2 plc / Lloyds Bank plc		15.000%		£775,158,000			21 December 2019		144.00				10
XS0459089685		LBG Capital No.2 plc / Lloyds Bank plc		15.000%		£67,853,000			22 January 2029		162.50				11

The Additional Tier 1 Securities

The table below identifies certain key characteristics of the perpetual subordinated contingent capital securities to be issued by LBG pursuant to the Exchange Offers.

Eligible Existing Notes	Currency	Capital Type	Initial Coupon	New Issue Price	First Call Date/Optional Redemption Date	Additional Tier 1 Securities Reset Coupon	Conversion Price	Minimum New Issue Size			Maximum New Issue Size
Euro PNC6 Exchange Offer	EUR	Additional Tier 1	6.375 %	100%	On or around 27 June  2020	Reset Reference Rate plus 5.29%	€0.780	€500,000,000			€750,000,000
Sterling PNC5 Exchange Offer	GBP	Additional Tier 1	7.000 %	100%	On or around 27 June 2019	Reset Reference Rate plus 5.06%	£0.643	£300,000,000			£1,250,000,000
Sterling PNC9 Exchange Offer	GBP	Additional Tier 1	7.625 %	100%	On or around 27 June  2023	Reset Reference Rate plus 5.01%	£0.643	£300,000,000			£1,250,000,000
Sterling PNC15 Exchange Offer	GBP	Additional Tier 1	7.875 %.	100%	On or around 27 June  2029	Reset Reference Rate plus 4.83%	£0.643	£300,000,000			£750,000,000

The Euro Additional Tier 1 Securities will be in registered form in denominations of €200,000 and integral multiples of €1,000 in excess thereof, and will initially be issued in global form.

Each series of Sterling Additional Tier 1 Securities will be in registered form in denominations of £200,000 and integral multiples of £1,000 in excess thereof, and will initially be issued in global form.

The Additional Tier 1 Securities will not be listed or admitted to trading on issue. Applications are intended to be made for each Series of Additional Tier 1 Securities to be admitted to trading on the Global Exchange Market of the Irish Stock Exchange with such admission intended to occur within two months of the relevant Settlement Date.

Further details of the Additional Tier 1 Securities are set out in the Exchange Offer Memorandum.

Offers to Exchange

Holders of Existing Notes should refer to the detailed terms of the Exchange Offer Memorandum in order to ascertain how to validly Offer to Exchange their Existing Notes in accordance with the terms of the relevant Exchange Offer(s) and the requirements of the relevant Clearing System(s).

Notwithstanding any other provision of the Exchange Offer Memorandum, whether the relevant Offeror accepts Offers to Exchange from Holders is at its sole and absolute discretion and the Offerors may decide not to accept Offers to Exchange for any reason.

Holders whose Existing Notes Offered for Exchange are not accepted, or who do not participate in the relevant Exchange Offer, will not be eligible to receive Additional Tier 1 Securities in exchange for such Existing Notes and (unless successfully tendered in the Retail Holdings Offer where that is available to such Holder) shall continue to hold such Existing Notes subject to their terms and conditions.

None of the Offerors, the Global Co-ordinators and Joint Lead Dealer Managers, Joint Lead Dealer Managers and the Joint Dealer Managers (together, the "Dealer Managers"), the Trustee or the Exchange Agent (or their respective directors, employees or affiliates) makes any representation or recommendation whatsoever regarding the Exchange Offer Memorandum or the Exchange Offers, or any recommendation as to whether Holders of Existing Notes should participate in the Exchange Offers.

Minimum Offer Amount

No Offer to Exchange Existing Notes will be accepted unless such Offer to Exchange relates to a sufficient principal amount of such Existing Notes (the "Minimum Offer Amount") at least equal to €200,000, in the case of each Series of the Euro Existing Notes, or £200,000, in the case of each Series of Sterling Existing Notes (both before and after scaling, if any).

Minimum and Maximum New Issue Size

Each Exchange Offer is conditional upon receiving valid Offers to Exchange that, if and when accepted, would result in LBG issuing Additional Tier 1 Securities of the relevant Series satisfying the relevant Minimum New Issue Size Condition (the Minimum New Issue Size being as set out in the column entitled "Minimum New Issue Size" of the table set out under the heading "The Additional Tier 1 Securities" above).

The Exchange Offers are not inter-conditional and the Offerors expect to proceed with any other Exchange Offer where the Minimum New Issue Size has been reached. If the Minimum New Issue Size for a Series of Additional Tier 1 Securities is not reached, the Offerors reserve the right (at their sole discretion) to waive the Minimum New Issue Size Condition or reduce the Minimum New Issue Size and to proceed with the relevant Exchange Offer.

The aggregate principal amount of Additional Tier 1 Securities of a particular Series to be issued will be capped at the relevant Maximum New Issue Size (as set out in the column entitled "Maximum New Issue Size" of the table set out under the heading "The Additional Tier 1 Securities" above).

The Offerors reserve the right (in their sole discretion) to increase, decrease or waive each specific Maximum New Issue Size. Further Additional Tier 1 Securities of the same or different series may be issued in the future for cash or otherwise.

The Maximum New Issue Size applicable to each Exchange Offer is independent from those set for the other Exchange Offers.

Exchange Price, Accrued Interest and Cash Rounding Amounts

Holders who validly Offer to Exchange their Existing Notes at or prior to the Expiration Time and whose Offers to Exchange are accepted will receive Additional Tier 1 Securities of the relevant Series in an amount (rounded down to the nearest €1,000 or £1,000, as applicable) equal to the aggregate principal amount of such Existing Notes accepted for exchange multiplied by the relevant Exchange Price, subject to the requirement for each Holder to exchange at least the relevant Minimum Offer Amount. Such Holders will also receive any applicable Accrued Interest Payments and Cash Rounding Amounts (if applicable).

Acceptance Priority Level and Scaling

The "Acceptance Priority Level" is the relative ranking of a Series of Existing Notes in the relevant numerical order of acceptance priority for each Series of Existing Notes in an Exchange Offer (the "Exchange Priority").

The maximum aggregate principal amount of each Series of Existing Notes that may be accepted for exchange by the Offerors in any Exchange Offer will be based on the Exchange Priority set out in the column entitled "Acceptance Priority Level" in each table set out under the heading "The Existing Notes" above (in each case, with the Existing Notes that are ascribed Acceptance Priority Level "1" having the highest priority for acceptance).

Upon expiration of the relevant Exchange Offer Period, Offerors may (but have no obligation to Holders to) accept Offers to Exchange and, if they do so accept, will do so in accordance with the Exchange Priority for the relevant Exchange Offer. The Offerors intend to accept Offers to Exchange until either (i) they have accepted all of the Existing Notes validly offered and eligible for exchange or (ii) the aggregate principal amount of the relevant Series of Additional Tier 1 Securities to be issued in exchange for Existing Notes is the maximum such amount that can be issued without exceeding the relevant Maximum New Issue Size, all in accordance with the operation of the relevant Exchange Priority.

Where the acceptance in accordance with the relevant Exchange Priority of all valid Offers to Exchange of a Series of Existing Notes would require a greater aggregate principal amount of the relevant Series of Additional Tier 1 Securities to be issued than the relevant Maximum New Issue Size, in the case of the Series of Existing Notes with the lowest ranking Acceptance Priority Level that is being accepted for exchange only, the relevant Offeror will accept such Offers to Exchange on a pro rata basis, as described in the Exchange Offer Memorandum, and the relevant Offeror will not accept any Offers to Exchange in respect of any Series of Existing Notes with a lower ranking Acceptance Priority Level in the relevant Exchange Priority than that Series of Existing Notes.

The Exchange Priority applicable to each Exchange Offer is independent from those set for the other Exchange Offers.

Indicative Timetable of Events

The times and dates below are indicative only. The below times and dates are subject, where applicable, to the right of the Offerors to extend, re-open, amend, waive any condition of, terminate and/or withdraw any one or more of the Exchange Offers (subject to applicable law and as provided in the Exchange Offer Memorandum).

Accordingly, the actual timetable for any one or more of the Exchange Offers may differ significantly from the expected timetable set out below.

Events		Dates and Times (All times are London time)
Commencement of the Exchange Offer Period
Exchange Offers announced and notice of the Exchange Offers submitted to the Clearing Systems and published via RNS. Exchange Offer Memorandum available from the Exchange Agent.		6 March 2014.
Expiration Date and Time
Deadline for receipt of all Electronic Instruction Notices. End of the relevant Exchange Offer Period.		4.00 p.m. on 19 March 2014.
Results Announcement Date
On the relevant Results Announcement Date, the Offerors will announce: (i) whether valid Offers to Exchange pursuant to the relevant Exchange Offer are accepted by the relevant Offeror, (ii) the aggregate principal amounts of each relevant Series of the Existing Notes the relevant Offeror will be accepting for exchange, (iii) the satisfaction or waiver of the relevant Minimum New Issue Size Condition, (iv) in respect of the relevant Exchange Offer, whether Offers to Exchange for each Series of Existing Notes included in that Exchange Offer are to be accepted in full (if at all) or on a pro rata basis and, where accepted on a pro rata basis, the extent to which such Offers to Exchange will be scaled, (v) the relevant New Issue Amount and (vi) the relevant Settlement Date.		Expected to be on or around 20 March 2014.
Settlement Date
Settlement Date for each of the Exchange Offers, including (i) delivery of the Additional Tier 1 Securities in exchange for Existing Notes validly Offered for Exchange and accepted and (ii) payment of Accrued Interest Payments and Cash Rounding Amounts (if any).		Expected to be on or around 1 April 2014.

Holders are advised to check with any bank, securities broker, Clearing Systems or other Intermediary (as defined below) through which they hold their Existing Notes whether such Intermediary applies different deadlines for any of the events specified in the Exchange Offer Memorandum, and then to allow for such deadlines if the deadlines set by such persons are prior to the deadlines set out in the Exchange Offer Memorandum.

General

The Offerors may, in their sole discretion, extend, re-open, amend, waive any condition of, terminate and/or withdraw any one or more of the Exchange Offers at any time (subject to applicable law and as provided in the Exchange Offer Memorandum). Details of any such extension, re-opening, amendment, waiver (if permitted), termination and/or withdrawal will be announced wherever applicable as provided in the Exchange Offer Memorandum as soon as reasonably practicable after the relevant decision is made.

Electronic Instruction Notices will be irrevocable once submitted, except in the limited circumstances described in the section entitled "Terms of the Exchange Offers - 13. Revocation Rights" of the Exchange Offer Memorandum.

Holders are advised to read carefully the Exchange Offer Memorandum for full details of and information on the procedures for participating in the Exchange Offers.

Unless stated otherwise, announcements will be made by the Offerors (i) by the issue of a press release to a Notifying News Service, (ii) by the delivery of notices to the relevant Clearing Systems for communication to Direct Participants, (iii) through RNS. Announcements and (iv) by publication on the website of LBG: http://www.lloydsbankinggroup.com/investors. Announcements may also be found on the relevant Reuters International Insider Screen. Copies of all such announcements, press releases and notices can also be obtained from the Exchange Agent, the contact details for which are specified below. In addition, holders of Existing Notes may contact the Dealer Managers for information using the contact details specified below.

For further information please contact:

For analysts:

Charles King

Director of Investor Relations

Lloyds Banking Group

[e-mail]

[phone]

For press:

Matt Smith

Media Relations

[e-mail]

[phone]

Requests for information in relation to, and for any documents or materials relating to, the Exchange Offers should be directed to:
EXCHANGE AGENT
Lucid Issuer Services Limited Leroy House 436 Essex Road London N1 3QP United Kingdom Tel: [phone] Attention: Sunjeeve Patel/David Shilson/Victor Parzyjagla Email: [e-mail]
Any questions regarding the terms of the Exchange Offers may be directed to any of the Dealer Managers listed below:
GLOBAL CO-ORDINATORS & JOINT LEAD DEALER MANAGERS
BofA Merrill Lynch Merrill Lynch International 2 King Edward Street London EC1A 1HQ United Kingdom		Goldman Sachs International Peterborough Court 133 Fleet Street London EC4A 2BB United Kingdom		Lloyds Bank plc 10 Gresham Street London EC2V 7AE United Kingdom
Attention: John Cavanagh Tel: [phone] Email: [e-mail] Attention: Karl Bystedt Wikblom Tel: [phone] Email: [e-mail]		Attention: Liability Management Group Tel: [phone] Email: [e-mail]		Attention: Keval Shah Tel: [phone] Email: [e-mail] Attention: Akis Psarris Tel: [phone] Email: [e-mail]
JOINT LEAD DEALER MANAGERS
Deutsche Bank AG, London Branch Winchester House 1 Great Winchester Street London EC2N 2DB United Kingdom			UBS Limited 1 Finsbury Avenue London EC2M 2PP United Kingdom
Attention: Liability Management Group Tel: [phone] Email: [e-mail]			Attention: Liability Management Group Tel: [phone] Email: [e-mail] / [e-mail]
JOINT DEALER MANAGERS
Barclays Bank PLC 5 The North Colonnade Canary Wharf London E14 4BB United Kingdom	BNP Paribas 10 Harewood Avenue London NW1 6AA United Kingdom				Citigroup Global Markets Limited Citigroup Centre Canada Square Canary Wharf London E14 5LB United Kingdom
Attention: Liability Management Group Tel: [phone] Email: [e-mail]	Attention: Liability Management Group Tel: [phone] Email: [e-mail]				Attention: Liability Management Group Tel:[phone] Email: [e-mail]
Crédit Agricole Corporate and Investment Bank Broadwalk House 5 Appold Street London EC2A 2DA United Kingdom	Credit Suisse Securities (Europe) Limited One Cabot Square Canary Wharf London E14 4QJ United Kingdom				HSBC Bank plc 8 Canada Square London E14 5HQ United Kingdom
Attention: Liability Management Tel:[phone] Email: [e-mail]	Attention: Liability Management Desk Tel: [phone] Email: [e-mail]				Attention: Liability Management Group Tel: [phone] Email: [e-mail]
J.P. Morgan Securities plc 25 Bank Street Canary Wharf London E14 5JP United Kingdom			Morgan Stanley & Co. International plc 25 Cabot Square Canary Wharf London E14 4QA
Attention: Liability Management Tel: [phone] Email: [e-mail]			Attention: Liability Management Tel: [phone] Email: [e-mail]

DISCLAIMER 

This announcement must be read in conjunction with the Exchange Offer Memorandum. This announcement and the Exchange Offer Memorandum contain important information which should be read carefully before any decision is made with respect to the Exchange Offers. If you are in any doubt as to the contents of this announcement or the Exchange Offer Memorandum or the action you should take, you are recommended to seek your own financial and legal advice, including as to any tax consequences, immediately from your stockbroker, bank manager, solicitor, accountant or other independent financial or legal adviser. Any individual or company whose Existing Notes are held on its behalf by a broker, dealer, bank, custodian, trust company or other nominee or intermediary must contact such entity if it wishes to participate in the Offers. None of the Dealer Managers, the Exchange Agent or the Offerors makes any recommendation as to whether Holders should offer Existing Notes for exchange pursuant to the Exchange Offers.

OFFER RESTRICTIONS

This announcement and the Exchange Offer Memorandum does not constitute an offer or an invitation to participate in the Exchange Offer in any jurisdiction in or from which, or to any person to whom, it is unlawful to make the relevant offer or invitation under applicable laws. The distribution of this announcement and the Exchange Offer Memorandum in certain jurisdictions may be restricted by law. Persons into whose possession this announcement and the Exchange Offer Memorandum comes are required by each of the Offerors, the Dealer Managers and the Exchange Agent to inform themselves about, and to observe, any such restrictions.

No action has been or will be taken in any jurisdiction by the Issuer, the Dealer Managers or the Exchange Agent that would constitute a public offering of the Additional Tier 1 Securities other than the preparation of the Exchange Offer Memorandum in compliance with articles 652a and 1156 of the Swiss Code of Obligations for purposes of making the Exchange Offer in Switzerland.

United States

The Exchange Offers are not being made, and will not be made, directly or indirectly, in or into, or by use of the mail of, or by any means or instrumentality of interstate or foreign commerce of, or of any facilities of, a national securities exchange of, the United States. This includes, but is not limited to, facsimile transmission, electronic mail, telex, telephone and the internet. The Existing Notes may not be Offered for Exchange by any such use, means, instrumentality or facility from or within the United States or by persons located or resident in the United States as defined in Regulation S of the U.S. Securities Act of 1933, as amended (the "Securities Act") or to U.S. persons as defined in Regulation S of the Securities Act (each a "U.S. person"). Accordingly, copies of this announcement, the Exchange Offer Memorandum and any other documents or materials relating to any one or more of the Exchange Offers are not being, and must not be, directly or indirectly, mailed or otherwise transmitted, distributed or forwarded (including, without limitation, by custodians, nominees or trustees) in or into the United States or to U.S. persons. Any purported Offer to Exchange Existing Notes resulting directly or indirectly from a violation of these restrictions will be invalid, and any purported Offer to Exchange made by a person located in the United States or any agent, fiduciary or other Intermediary (as defined below) acting on a non-discretionary basis for a principal giving instructions from within the United States will be invalid and will not be accepted.

The Exchange Offer Memorandum is not an offer of securities for sale in the United States or to U.S. persons. Securities may not be offered or sold in the United States absent registration under, or an exemption from the registration requirements of, the Securities Act. The Existing Notes, the guarantees in respect thereof and the Additional Tier 1 Securities have not been, and will not be, registered under the Securities Act or the securities laws of any state or jurisdiction of the United States, and may not be offered, sold or delivered, directly or indirectly, in the United States or to, or for the account or benefit of, U.S. persons. The purpose of the Exchange Offer Memorandum is limited to the Exchange Offers, and the Exchange Offer Memorandum may not be sent or given to a person in the United States or otherwise to any person other than in an offshore transaction in accordance with Regulation S under the Securities Act.

Each Holder of Existing Notes participating in one or more of the Exchange Offers will be deemed to represent that it is not a U.S. person and it is not located in the United States and is not participating in such an Exchange Offer from the United States or it is acting on a non-discretionary basis for a principal located outside the United States that is not giving an order to participate in such an Exchange Offer from the United States. For the purposes of this and the above paragraph, "United States" means United States of America, its territories and possessions, any state of the United States of America and the District of Columbia.

Belgium

None of this announcement, the Exchange Offer Memorandum nor any other documents or materials relating to any one or more of the Exchange Offers have been submitted to or will be submitted for approval or recognition to the Financial Services and Markets Authority (Autorité des services et marches financiers / Autoriteit financiële diensten en markten) and, accordingly, the Exchange Offers may not be made in Belgium by way of a public offering, as defined in Articles 3 and 6 of the Belgian Law of 1 April 2007 on public takeover bids (the "Belgian Takeover Law") or as defined in Article 3 of the Belgian Law of 16 June 2006 on the public offer of placement instruments and the admission to trading of placement instruments on regulated markets (the "Belgian Prospectus Law"), both as amended or replaced from time to time. Accordingly, the Exchange Offers may not be advertised and the Exchange Offers will not be extended, and none of this announcement, the Exchange Offer Memorandum nor any other documents or materials relating to any one or more of the Exchange Offers (including any memorandum, information circular, brochure or any similar documents) has been or shall be distributed or made available, directly or indirectly, to any person in Belgium other than (i) to persons which are "qualified investors" in the sense of Article 10 of the Belgian Prospectus Law, acting on their own account; or (ii) in any other circumstances set out in Article 6, §4 of the Belgian Takeover Law and Article 3, §4 of the Belgian Prospectus Law. This announcement and the Exchange Offer Memorandum have been issued only for the personal use of the above qualified investors and exclusively for the purpose of the Exchange Offers. Accordingly, the information contained in the Exchange Offer Memorandum may not be used for any other purpose or disclosed to any other person in Belgium.

France

The Exchange Offers are not being made, directly or indirectly, to the public in France. Neither this announcement, the Exchange Offer Memorandum nor any other documents or offering materials relating to any one or more of the Exchange Offers have been or shall be distributed to the public in France and only (i) providers of investment services relating to portfolio management for the account of third parties (personnes fournissant le service d'investissement de gestion de portefeuille pour compte de tiers) and/or (ii) qualified investors (investisseurs qualifiés), other than individuals, acting for their own account, all as defined in, and in accordance with, Articles L.411-1, L.411-2 and D.411-1 to D.411-3 of the French Code monétaire et financier, are eligible to participate in any one or more of the Exchange Offers. This announcement and the Exchange Offer Memorandum have not been and will not be submitted for clearance procedures (visa) of the Autorité des marchés financiers.

Italy

None of the Exchange Offers, this announcement, the Exchange Offer Memorandum nor any other documents or materials relating to any one or more of the Exchange Offers have been or will be submitted to the clearance procedure of the Commissione Nazionale per le Società e la Borsa ("CONSOB") pursuant to Italian laws and regulations.

The Exchange Offers are being carried out in the Republic of Italy as exempted offers pursuant to article 101-bis, paragraph 3-bis of the Legislative Decree No. 58 of 24 February 1998, as amended (the "Financial Services Act") and article 35-bis, paragraph 3 of CONSOB Regulation No. 11971 of 14 May 1999, as amended (the "Issuers' Regulation").

Accordingly, the Exchange Offers are only addressed to holders of Existing Notes located in the Republic of Italy who are "qualified investors" (investitori qualificati) as defined pursuant to and within the meaning of Article 100 of the Financial Services Act and article 34-ter, paragraph 1, letter b) of the Issuers' Regulation.

A holder of Existing Notes located in the Republic of Italy that qualifies as a "qualified investor" can tender Existing Notes through authorised persons (such as investment firms, banks or financial intermediaries permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act, CONSOB Regulation No. 16190 of 29 October 2007, as amended from time to time, and Legislative Decree No. 385 of 1 September 1993, as amended) and in compliance with applicable laws and regulations or with requirements imposed by CONSOB or any other Italian authority.

Each intermediary must comply with the applicable laws and regulations concerning information duties vis-à-vis its clients in connection with the Existing Notes or the Exchange Offers.

United Kingdom

The communication of this announcement, the Exchange Offer Memorandum and any other documents or materials relating to any one or more of the Exchange Offers are not being made, and such documents and/or materials have not been approved, by an authorised person for the purposes of section 21 of the FSMA. Accordingly, such documents and/or materials are not being distributed to, and must not be passed on to, the general public in the United Kingdom. The communication of such documents and/or materials is exempt from the restriction on financial promotions under section 21 of the FSMA on the basis that it is only directed at and may be communicated to (1) those persons who are existing members or creditors of the Group or other persons within Article 43 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, and (2) any other persons to whom these documents and/or materials may lawfully be communicated.

Isle of Man

The communication of this announcement, the Exchange Offer Memorandum and any other documents or materials relating to any of the Exchange Offers has not been or will not be registered or filed as a prospectus with any governmental or other authority in the Isle of Man and the Exchange Offer Memorandum and the issue of the Additional Tier 1 Securities have not been approved by the Isle of Man Financial Supervision Commission. Any offer for subscription, sale or exchange of the Additional Tier 1 Securities in or from the Isle of Man must be made:

(a)     by an Isle of Man financial services licence holder appropriately licensed under section 7 of the Financial Services Act 2008 to do so;

(b)     in accordance with any relevant exclusion contained within the Regulated Activities Order 2011; or

(c)     in accordance with any available relevant exemption contained within the Financial Services (Exemptions) Regulations 2011.

Jersey

The communication of this announcement, the Exchange Offer Memorandum and any other documents or materials relating to any of the Exchange Offers is not subject to and has not received approval from either the Jersey Financial Services Commission or the Registrar of Companies in Jersey and no statement to the contrary, explicit or implicit, is authorised to be made in this regard. The Additional Tier 1 Securities being offered may be offered or sold in Jersey only in compliance with the provisions of the Control of Borrowing (Jersey) Order 1958.

Guernsey

The communication of this announcement, the Exchange Offer Memorandum and any other documents or materials relating to any of the Exchange Offers has not been approved or authorised by the Guernsey Financial Services Commission for circulation in Guernsey. The communication of this announcement, the Exchange Offer Memorandum and any other documents or materials relating to any of the Exchange Offers may not be distributed or circulated directly or indirectly to any persons in the Bailiwick of Guernsey other than (i) by a person licensed to do so under the terms of the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, or (ii) to those persons regulated by the Guernsey Financial Services Commission as licensees under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, the Banking Supervision (Bailiwick of Guernsey) Law, 1994, the Insurance Business (Bailiwick of Guernsey) Law, 2002 or the Regulation of Fiduciaries, Administration Business and company Directors etc. (Bailiwick of Guernsey) Law, 2000.

General

The Dealer Managers and the Exchange Agent (and their respective directors, employees or affiliates) make no representations or recommendations whatsoever regarding this announcement and the Exchange Offer Memorandum or any of the Exchange Offers. Each Exchange Agent is the agent of the Offerors and owes no duty to any Holder. None of the Offerors, the Dealer Managers, the Trustee or the Exchange Agent makes any recommendation as to whether or not Holders should participate in any one or more of the Exchange Offers.

The Exchange Offers do not constitute an offer to buy or the solicitation of an offer to sell the Existing Notes and/or the Additional Tier 1 Securities in any circumstances in which such offer or solicitation is unlawful. In those jurisdictions where the securities or other laws require the relevant Exchange Offer to be made by a licensed broker or dealer and either of the Dealer Managers or, where the context so requires, any of their respective affiliates is such a licensed broker or dealer in that jurisdiction, the relevant Exchange Offer shall be deemed to be made on behalf of the Offerors by such Dealer Manager or affiliate (as the case may be) in such jurisdiction.

 

END

 

 

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