The U.K.Treasury has abandoned plans to sell off its remaining 9.1% stake in to thepublic, saying market volatility made a retail offer unviable.
In a letterto Chancellor Philip Hammond dated Oct. 7, the chairman of the government'sholding company for private company stakes, UK Financial Investments Ltd., recommended thewithdrawal of plans to sell Lloyds shares to retail investors. JamesLeigh-Pemberton said a so-called trading plan represented the best option forrecouping public funds invested in the bank given "recent volatility inbank share prices."
In linewith the recommendation, the government will return to selling down its stakethrough a trading plan operated by Morgan Stanley & Co. International Plc.A previous plan launched in December 2014 saw the government cut itsstake from just under 25% to the current 9.1%.
Under thatplan, the Treasury committed to sell shares only when Lloyds' share price wasabove the 73.6 pence average per-share price paid during the bank's bailout.But Lloyds shares plunged in the wake of Britain's vote to leave the EU, and itcontinues to trade well below that price, closing Oct. 6 at 54.99 pence andhaving finished above 60 pence on just two days since the June 23 referendum.
The newplan eliminates the 73.6 pence-per-share provision, with the Treasury sayingthat it plans to recoup the entire £20.3 billion injected into Lloyds. It ownsabout 6.5 billion total shares in Lloyds, and previous share sales have raiseda total of £16.9 billion.
The tradingplan will run for 12 months, and formally allows Morgan Stanley to sell up to15% of the total trading volume of Lloyds.
GoldmanSachs International is acting as privatization strategy adviser to UKFI, withFreshfields Bruckhaus Deringer LLP serving as legal counsel.