Top Lloyds investors shrug off dividend row
Two top ten shareholders in Lloyds TSB Plc. said on Thursday they are prepared to back the bank's takeover of HBOS even if the combined bank is barred from paying dividends for a time.
Premier Foods cuts dividend and rejigs debtUnder a rescue plan unveiled on Monday, the government will provide up to 17 billion pounds to Lloyds and HBOS, underwriting share issues worth 13 billion pounds and buying preference shares worth a further 4 billion pounds.
On Wednesday, sources said that banks were urging the government to lift restrictions which ban dividend payments until the preference shares are repaid.
The Lloyds shareholders made it clear however that their support did not hinge on the renegotiation of the bailout to allow dividend payments.
One top ten investor, who spoke on condition of anonymity, said: "We would support the deal as it is at the moment. The deal is necessary to keep the whole system running which is why the government has been helping the deal along."
"But clearly selling preference shares to the government is a transfer of money from the bank to the government so if that transfer can be reduced then it is more advantageous for shareholders."
Analysts have said that Lloyds was best placed to push for changes because suspending its dividend - one of the most generous in the FTSE 100 - could erode its shareholders' support for its takeover of HBOS.
A second top ten investor, who also requested anonymity, said: "We believe this is a good deal for both banks and we support it.
"There are probably some Lloyds shareholders that will vote against the deal, but on balance we think it will go through."
Shares in Lloyds TSB were down 1.26 percent at 148.3 pence in afternoon trade, while shares in HBOS were down 4.2 percent at 82 pence. Overall the FTSE 100 share index was down 6.37 percent.
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