A SHAREHOLDER group that has filed a legal claim for compensation from Lloyds over its controversial rescue of HBOS in 2008 is pressing big institutional investors to throw their weight behind the action.
Lloyds Action Now (LAN), which represents 7,500 small shareholders, said an expected granting of a group litigation order (GLO) by the High Court this week will pave the way for more than 800,000 more to join, as well as leading institutional shareholders.
No specific amount of compensation has been outlined in the lawsuit, but it is argued that £12 billion of shareholder value was destroyed when HBOS was taken over by Lloyds before the latter was itself rescued with a £20bn taxpayer bailout.
Adrian Lithgow, one of the founders of LAN, said: “We will be able to directly approach institutional shareholders if, as expected, the GLO is granted. And we will do.
“Institutions have nothing to lose by signing up to LAN and everything to gain. It will not cost them to take their case to court, and if they do not join, and LAN’s claimants win their case, they will be effectively prevented from mounting another case.
“We have had to wait a long time as it has been a complicated case. But we believe we have strong momentum now and any granting of the GLO will give us more because we can approach others to join us.”
LAN’s action is funded by specialist investors that support litigation claims. Legal experts say it is virtually certain the GLO application, submitted by LAN lawyers Harcus Sinclair, will be granted as Herbert Smith, the lawyers representing part-taxpayer owned Lloyds Banking Group, have not objected to it.
A similar GLO has been granted in separate legal actions against Royal Bank of Scotland relating to its £12bn rights issue in 2008, where a mixture of private and institutional shareholders claim RBS misled them as to its financial strength at the time of the cash call.
It is understood LAN is hopeful of strong eventual participation by institutions in the action against Lloyds, as many of them are likely to be the same as those taking part in parallel lawsuits against RBS, which is 81 per cent owned by the taxpayer.
The latter include Edinburgh-based Standard Life Investments, Legal & General Investment Management, Aviva, Prudential and the University Superannuation Fund.
The RBoS Shareholders Action, representing 100 institutional investors and 12,000 small shareholders, has filed a £4bn lawsuit against RBS.
LAN argues that information about the emergency funding HBOS was receiving, such as the £25bn through the Bank of England’s special liquidity scheme in the 2008 financial crash, was not disclosed at the time of the takeover by Lloyds.
The action group also alleges that there was a loan from the US Federal Reserve to prop up HBOS that was not divulged.
LAN has named a number of former Lloyds directors in its action, including former chairman Sir Victor Blank and former chief executive Eric Daniels.
Both RBS and Lloyds, which is 24 per cent owned by the taxpayer, have rejected the lawsuits and said they will be vigorously defended in the courts.