Morgan Stanley (NYSE:MS) has been granted a deal by the government of the United Kingdom to sell a huge chunk of shares in Lloyds Banking Group PLC (NYSE:LYG).
Morgan Stanley agreed to a £1 fee
According to the Wall Street Journal, Morgan Stanley (NYSE:MS) agreed to a collect a fee of £1 or $1.57 to sell the shares of Lloyds Banking Group PLC (NYSE:LYG) until the end of June next year. Although the fee was little, Morgan Stanley was allowed to charge commissions to investors, according to people familiar with the deal.
The UK government currently owns 25% stake in Lloyds Banking Group PLC (NYSE:LYG). Morgan Stanley (NYSE:MS) has been instructed to sell not more than 15% of the volume of all the shares of Lloyds traded in the market.
The UK government wants the selling price for the shares to be more than the amount the taxpayers paid to rescue Lloyds during the financial crisis. People familiar with the situation suggested that stock sale could be around £3 billion or $4.72 billion based on the past trading patterns.
Lloyds passed balance sheet stress test
The U.K. Financial Investments Ltd manages the government’s stake in Lloyds Banking Group PLC. Its decision to authorize Morgan Stanley (NYSE:MS) to sell its stake came after Lloyds Banking Group PLC (NYSE:LYG) passed a balance sheet stress test.
Morgan Stanley (NYSE:MS) along with JP Morgan Chase & Co. (NYSE:JPM) and UBS AG (NYSE:OUBS) and Bank of America Merrill Lynch sold 7.5% of the shares of Lloyds Banking Group PLC (NYSE:LYG) through an accelerated book build last March. None of the banks received a fee and did not collect commission payments.
According to one person familiar with the U.K. governments deal with Morgan Stanley (NYSE:MS), the firm was selected due to its previous work with the U.S. government related to the sale of its stake in Citigroup Inc (NYSE:C) in 2010. Morgan Stanley led the sale of 7.7 billion Citigroup shares held by the U.S government after rescuing the bank during the 2008 financial crisis.
The U.K. government currently owns 17.8 billion ordinary shares of Lloyds Banking Group Plc (NYSE:LYG). The government already recovered £7.4 billion of taxpayers’ money from selling some of its stake in Lloyds.