LONDON, Aug 6 (Reuters) - Thousands of investors havelaunched a group legal action against Lloyds Banking Group, seeking compensation for losses arising from thebank's takeover of HBOS during the 2008 financial crisis.
Lloyds paid a heavy price for the government-engineeredtakeover of HBOS, requiring a 20 billion pound ($33.7billion)bailout after HBOS was caught out by a near-shutdown ofthe wholesale funding markets that it relied on more thanrivals.
The Lloyds Action Now group, which comprises 7,500investors, estimates shareholders lost a total of 12 billionpounds as a result of the takeover making the claim potentiallyone of the biggest ever before the British courts.
State-backed rival Royal Bank of Scotland is facinga similar action from investors who say they were misled duringan emergency cash call in 2008 and are claiming damages ofaround 4 billion pounds.
In a statement on Wednesday, the Lloyds shareholder groupsaid it had launched proceedings in the UK High Court againstthe bank and former directors including ex-chairman Victor Blankand ex-chief executive Eric Daniels.
Lloyds said it would defend itself against the action.
"The group's position remains that we do not consider thereto be any legal basis to the claims made by Lloyds Action Now,"a bank spokesman said.
The claim alleges vital information about the parlous stateof HBOS was deliberately withheld from shareholders when theywere asked to approve Lloyds' takeover of Britain's biggestmortgage lender.
It states that details of 25 billion pounds of emergencyfunding provided to the bank by the Bank of England had beenkept secret so HBOS could be kept afloat while the takeover byLloyds was mounted.
The group has also applied for a group litigation order sothat 800,000 private retail investors in the bank can have theircase heard in the same hearing as institutional investors.
($1 = 0.5941 British Pounds) (Reporting by Matt Scuffham; Editing by Erica Billingham)
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