Qatar & Abu Dhabi Wealth Funds In Talks With NBNK Over Lloyds Bid

Middle Eastern wealth funds Qatar Holding LLC and Abu Dhabi’s Mubadala Development Co. have held talks with Lloyds bank bidder, NBNK, to bolster its £2bn approach for the 632 branches Lloyds is struggling to sell.

The talks centre on increasing the level of support for NBNK’s new tilt at the branches, known within Lloyds as Project Verde.

The backing of either or both funds – which have major investments in household business names such as Harrods and EMI respectively – would be a major boost to NBNK’s attempt to win approval from Lloyds’ board.

Although it is too early for investment mandates to have been signed, it is known that senior NBNK directors have discussed their plans for Verde with the funds in the aim of bringing them on board as cornerstone investors as part of an eventual offer.

The news reflects the determination of NBNK chief executive, Gary Hoffman, to win control of the Verde branches and underlines the capital strength the new banking venture is likely to have.

It comes just days after Lloyds ended exclusive negotiations with the Co-operative Group for Verde after it failed to secure a deal despite four months of intense talks. Lloyds has now opened up the process to allow negotiations with NBNK to begin, at the same time as highlighting the continued work on an independent stock market float for the Verde business.
Senior sources within NBNK told The Sunday Telegraph the existence of the wealth fund talks, and noted that there had been considerable interest to date.
It is believed Mr Hoffman has spoken to a number of British blue-chip investors in addition to the talks he has already held with Invesco, Aviva, Baillie Gifford and F&C, which are the bedrock of NBNK’s current shareholder register. Another source noted that, due to the nature of NBNK’s current listing on Aim, the London Stock Exchange’s junior market, a number of leading funds have been precluded from investing because of liquidity rules.

Capital strength is one of the key areas highlighted by Lloyds in a letter sent on Friday to Lord Levene of Portsoken, NBNK’s chairman, detailing areas for further clarification. Antonio Horta-Osorio, Lloyds chief executive, spoke to Lord Levene briefly before the letter was sent. The Lloyds CEO has said he requires further evidence that NBNK will pass key regulatory hurdles before he meets NBNK’s management team.

Other areas of concern include NBNK’s governance structures and the suitability of its technology platform.
Co-op, which remains Lloyds’ preferred bidder despite the exclusivity period elapsing, is understood to have resolved a number of the governance and capital questions raised by the Financial Services Authority.
The mutual society’s board, which is due to meet next month, is expected to make a decision on whether to press ahead with its bid before its annual meeting in late May.

NBNK is understood to be confident it can provide the comfort Lloyds requires in order to open detailed talks.
Its revised approach, if chosen, will allow Lloyds shareholders, including the taxpayer which owns 40pc of the bank, to choose between taking a new share in Verde, which would be reversed into NBNK, or cash in lieu of shares.
Lloyds is keen to make a decision on a final option before the end of June.

Spokesmen for all parties declined to comment, The Sunday Telegraph reported.