Lloyds Banking Group this morning announced the UK’s biggest rights issue, selling its shares at almost a 60% discount.

Shareholders will be able to buy the Lloyds shares at 37p, a 59.5% discount against Monday’s closing price.

Some 36.5 billion new shares will be issued and by raising £13.5 billion the Bank is looking to avoid the government’s Asset Protection Scheme. This is part of £22 billion the Bank is currently looking to raise.

Shareholders do not have to take part in the rights issue. If they do decide to take part it will cost the average shareholder around £340.

Nick Raynor, investment adviser at The Share Centre, commented ‘If shareholders cannot afford the rights issue then we advise them to sell the shares and buy back after Friday 27 November.

This way they can avoid subscribing to the rights issues’ terms and be fully aware of their exposure to the company. Shareholders will vote on the plan on Thursday and have until early December to decide whether to take up their rights.’

If as a Lloyds shareholder you don’t do anything at all then Lloyds will sell your allocation of shares on your behalf and send you any profits by cheque.

City investors appear to have confidence in what Lloyds are doing as they are expected to take part.

Investors should of course make their own judgements on buying or selling shares and if in doubt seek independent financial advice.

The Lloyds share price is currently 92.65p, up around 1.3%.
©MoneyHighStreet.com Personal Finance