Magic circle firm Linklaters was called in to advise banking group Lloyds on whether it could pull out of the disastrous takeover of HBOS agreed at the height of the financial crisis, court documents have shown.
The firm, which advised Lloyds in the run-up to the takeover, had been drafted in again ahead of an expected trading update by HBOS in December 2008, two months after the deal had been agreed.
The HBOS rescue is the subject of a £600 million group action case, brought by around 6,000 former Lloyds shareholders who claim that Lloyds’ takeover was pushed through and recommended by Lloyds executives despite the fact they knew it would be ’disastrous’ for shareholders. Lloyds denies the claims.
One document published to support the claim, prepared by Linklaters partners Jeremy Parr and Matthew Bland, said at the time that ‘although the exact content of the trading update is not known, it is expected that this will contain details of developments in relation to write-downs required to be made by HBOS on, among other things, its corporate loan book’.
However it added: ‘Regardless of the severity of the trading update, it is not likely that its release would constitute grounds upon which Lloyds could withdraw from the acquisition.’
The documents appear to shed more light on the role that Linklaters played in the build up to and fallout from the deal and come as Parr prepares to give evidence in the case. Parr, formerly head of corporate at the magic circle firm and now general counsel at trading company Jardine Matheson Holdings, is due to give evidence for two days, starting on Monday.
After the takeover Lloyds took on a portfolio of bad assets owned by HBOS as well as huge debts. The government then bailed out the conglomerate to the tune of £20.3 billion.
The shareholder group is represented by London firm Harcus Sinclair, which specialises in bringing group action cases on behalf of individuals and corporate clients while Lloyds is represented by City firm Herbert Smith Freehills.