Magic circle trio advise Lloyds and RBS on £54.5bn banking shake-up

Slaughter and May, Linklaters and Freshfields Bruckhaus Deringer have landed advisory roles on Royal Bank of Scotland and Lloyds Banking Group’s plan to sell off branches and raise £54.5bn.

The Treasury announced today (3 November) that it had concluded discussions with both banks about their participation in the Government’s Asset Protection Scheme (APS), with Linklaters picking up the mandate to advise both RBS and Lloyds.

London corporate partners Jeremy Parr and Matthew Bland and capital markets partner Carson Welsh are advising Lloyds, which will not participate in the APS but has instead announced plans to raise £21bn through a £13.5bn rights issue, with a further £7.5bn to be raised through swapping existing debt. The Government will invest £5.7bn in the capital raising to maintain its stake at 43%.

Freshfields has stepped in to advise a large consortium of underwriters including Citi, Goldman Sachs, HSBC, JPMorgan, Merrill Lynch and UBS. The firm is fielding a team led by corporate partners Julian Makin and Don Guiney.

Lloyds Banking Group, formed in September 2008 after the merger of Lloyds TSB and HBOS, will also sell some 600 branches across the UK as well as brands such as Cheltenham & Gloucester and Intelligent Finance to meet European competition requirements.

Meanwhile, Linklaters global banking chief Rob Elliott is leading a team of lawyers, including banking partner Benedict James, advising RBS.

The bank will participate in the APS and will receive a capital injection of £25.5bn from the Government. To protect against a worst-case scenario, the Government will provide up to another £8bn in capital. The taxpayers’ economic stake in the bank will increase from 70% to 84%.

RBS will sell 318 branches in the UK as well as insurance brands such as Direct Line and Churchill.

Slaughters is advising longstanding client HM Treasury, with finance partner Matthew Tobin and M&A partner Tim Pharoah leading on the APS, with corporate partner Nilufer von Bismarck advising on the capital raisings. Corporate partner Charles Randell has also been involved.

The news follows recent announcements that nationalised UK bank Northern Rock and Dutch financial giant ING are both set to be restructured after being recapitalised by their respective governments.

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