Securities Exchange Act of 1934
Formula Price Methodology and Acceptance Priority Mechanism in an Exchange Offer by Lloyds Banking Group plc — Rule 14e-1(b)
Dear Mr. Douglas:
We are responding to your letter dated May 28, 2010 addressed to Michele M. Anderson, Nicholas P. Panos and Daniel F. Duchovny, as supplemented by telephone conversations with the Staff, with regard to your request for no-action relief. To avoid having to recite or summarize the facts set forth in your letter, our response is attached to the enclosed copy of your letter. Unless otherwise noted, capitalized terms in this letter have the same meaning as in your letter.
On the basis of your representations and facts presented in your letter, the Staff of the Division of Corporation Finance will not recommend that the Securities and Exchange Commission take enforcement action under Rule 14e-1(b) under the Securities Exchange Act of 1934 if the Company conducts the Offer by using the Formula Price Methodology and the Offer Acceptance Mechanism and stating the amount of securities sought as described in your letter. In issuing this no-action position, we considered the following facts, among others:
the Exchange Offer Memorandum will disclose an Exchange Ratio based upon a specified dollar value of its Shares issuable upon exchange for each Note accepted;
the Company will publish the final Exchange Ratio on a website maintained for the Offer by approximately 12:30 p.m., New York City time, on the Expiration Date of the Offer and disseminate this information in the identical manner in which the original Exchange Offer Memorandum was disseminated;
the Company will publish on the Offer website the daily indicative calculated per share values and exchange ratios and will provide a telephone number that its security holders can use to obtain Offer pricing-related information;
the Shares that will be offered as consideration in the Offer and used as the reference security in the pricing mechanism are listed on the London Stock Exchange and, in American Depositary Share form, on the New York Stock Exchange;
the Formula Price Methodology for determining the number of Shares to be issued in exchange for Notes, the Maximum Share Amount and the Note Priority Waterfall will be disclosed in the Exchange Offer Memorandum disseminated to security holders; the Formula Price Methodology, the Maximum Share Amount and the Note Priority Waterfall will remain fixed throughout the duration of the Offer; and, if there is a change in the Formula Price Methodology, the Maximum Share Amount or the Note Priority Waterfall, the Offer will remain open for at least 10 business days;
the Offer Materials will include disclosure informing holders of the Notes who do not hold Notes at Euroclear or Clearstream that they must make arrangements with their brokers, securities custodian or similar institutions for such brokers, securities custodian or similar institutions to deposit with Euroclear or Clearstream any Notes the holder wishes to tender sufficiently in advance of the expiration of the offer;
the Company will permit, and Euroclear and Clearstream will enable, tenders and withdrawals to be made until 11:59 p.m. on the Expiration Date, and the Company will disclose the procedures for making tenders and withdrawals, including tenders and withdrawals made outside of regular business hours, in the Offer Materials; and
the Company will use a proration mechanism to determine the exact amount of tendered Notes to be accepted for exchange in the event that accepting the total number of Notes tendered would necessitate the issuance of shares in excess of the maximum amount available for payment.
The foregoing no-action position is based solely on your representations and the facts presented in your letter dated May 28, 2010 as supplemented by telephone conversations with the Staff. Any different facts or circumstances may require a different conclusion. This relief is strictly limited to the application of Rule 14e 1(b) to the Company's use of the Formula Price Methodology and the Offer Acceptance Mechanism and disclosure regarding the amount of securities sought. This response expresses the Division's position on enforcement action only and does not express any legal conclusion on the question presented. The Company should discontinue the Offer pending further consultations with the Staff if any of the facts or representations set forth in your letter change.
We also direct your attention to the anti-fraud and anti-manipulation provisions of the federal securities laws, including Sections 9(a), 10(b) and 14(e) of the Exchange Act and Rule 10b-5 and Rule 14e-3 thereunder. Responsibility for compliance with these and any other applicable provisions of the federal securities laws rests with the participants in the Offer. The Division of Corporation Finance expresses no view with respect to any other questions that the Offer may raise, including any questions relating to the adequacy of the disclosure regarding, and compliance with any other federal or state laws to, the pricing mechanism, the amount of securities sought or the Offer.
Michele M. Anderson
Office of Mergers and Acquisitions
Division of Corporation Finance
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