Foundation head determined to secure cash from rights issue

Published on Monday 2 November 2009 21:23

THE chief executive of the charitable arm of Lloyds Banking Group last night said it had missed out on a £2 million windfall after being excluded from the bank's initial rights issue.

Mary Craig, chief executive of Lloyds TSB Foundation for Scotland, demanded a share of monies raised in the second rights issue, expected to be announced this week.

Ms Craig said the foundation's lawyers have said that, as a shareholder, it should have been included in the May rights issue.

"This money and that which would come from the second rights issue would be a crucial lifeline until we reach a settlement with the bank," she said.

Ms Craig said that the foundation, which has 15.3 million shares, had written more than 30 letters to the bank, majority-owned by the taxpayer, asking why it had been excluded from the initial rights issue.

"Yesterday we received a letter which included a small paragraph saying that if there's a subsequent rights issue then the likelihood is that we would be included in that.

"This is extremely important for us as they they've advised us we would be included and therefore we look forward to our share of the 'rump' (shares not taken up by shareholders which are then sold on the stock market].

"However, we also look forward to an explanation from the group as to why we were excluded in the May rights issue and look forward to an early settlement as soon as possible."

Ms Craig said the dispute over the rights issue centred around whether the foundation – which holds "limited voting shares" as defined in its articles of association determining how a company is governed – should be treated the same as ordinary share holders.

"Our legal adviser have said that we should have been treated in the same way as ordinary shareholders," Ms Craig said.

The foundation has been locked in a bitter dispute with the bank over plans to reduce funding to the foundation.

Ms Craig has said the foundation – which has distributed more than 12,000 awards worth about 84m to community projects across Scotland – could lose at least 6m a year, leading to a number of projects being forced to close.

The foundation, which along with another three foundations in the UK receives funding from the banking group, has refused to agree to a proposal by the bank for a short-term funding package with the condition that it accepts 0.1 per cent of the bank's pre-tax annual profits, which was set by an Act of Parliament, instead of 1 per cent it currently received, and agrees to a Lloyds' director on its board.