Lloyds hires UBS in bid to offload HBOS portfolio stakes

LLOYDS Banking Group is believed to have begun touting stakes in dozens of well-known companies it acquired as part of the takeover of Halifax Bank of Scotland.

According to reports out yesterday, Lloyds has hired Swiss bank UBS to assess the value of the portfolio of assets built up by Bank of Scotland Integrated Finance business. The process is likely to lead to UBS seeking out a buyer for all or part of the portfolio.

Stakes in the portfolio include high-profile businesses such as cinema chain Vue Entertainment, gym group David Lloyd Leisure and D&D, the owner of some of London's best known restaurants.

While these businesses continue to trade and should be covering the loans made by HBOS, the integrated finance business also took major equity stakes in the companies to which it loaned money, the value of which will have fallen sharply since the onset of the recession.

Reports yesterday claimed the stakes in the businesses had been acquired for at least £1.3 billion, but had since been written down in value by around £600 million – and that a sale of the assets could recover even less.

Other assets reportedly to be included in the sale cover a wide range of sectors, including Polypipe, a manufacturer of piping systems and Sunseeker, a yacht-building company. A formal sale process will reportedly begin in July, but Lloyds is believed to have already received a number of expressions of interest in parts of the portfolio from financial investors.

Reports cited Lloyds sources claiming it will not be forced into a fire sale of the HBOS investment portfolio, with asset values already depressed by the recession and the credit crunch.

Last week Lloyds said Bank of Scotland Integrated Finance would no longer be open to new business, but would still continue to manage its existing portfolio.

Lloyds declined to comment on plans for a sale of HBOS investments. HBOS ran in to trouble in part because of its major exposure to Britain's commercial and residential property market, continuing to invest when other banks had withdrawn from the market.

The largest property investments, such as retirement home builder McCarthy & Stone and house builder Crest Nicholson, are not part of the integrated finance business and are not being reviewed for sale by UBS, although analysts expect other parts of the business to be put up for sale eventually.

Lloyds is 43 per cent owned by the taxpayer and is eyeing disposals to bolster its balance sheet after its rescue takeover of HBOS hit the group hard and landed it with hefty bad debts.

It has announced new plans to raise cash and also revealed this week that there is a risk that it may be forced to sell core parts of the business under European Union state aid rules.

The bank must gain European approval for its business plan after taking part in last autumn's recapitalisation and credit guarantee scheme, as well as placing £260bn of toxic debts into the taxpayer-backed Asset Protection Scheme.

Analysts have said Royal Bank of Scotland, which also took part in the government schemes, will also need European approval.

Lloyds has faced mounting criticism from shareholders for its decision to buy HBOS – and last week announced that chairman Sir Victor Blank, the public face of the takeover, is to stand down before June's AGM.

Board faces scrutiny over deal

A BODY representing private investors is taking legal advice over whether the board of Lloyds, including chairman Sir Victor Blank and chief executive Eric Daniels, failed in their duty to protect shareholders when they decided to buy HBOS, reports have claimed.

The UK Shareholders' Association has hired law firm Carter-Ruck to look into the actions of the board in a deal which forced Lloyds to seek government assistance to recapitalise. The banking group is believed to have come under pressure from the government to buy HBOS, to prevent the troubled bank being nationalised, but Roger Lawson, a director of the association, said the responsibilities of the board were to protect the interests of their shareholders only.

Blank said last week that he would not seek re-election at Lloyds' AGM next month.