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The Culture Secretary has told Lloyds Banking Group that she is minded to intervene to safeguard press freedom as it seeks to complete a £1.2bn debt repayment deal that would hand control of The Telegraph to a fund backed by Abu Dhabi.
Lucy Frazer has written to Lloyds, the Barclay family and RedBird IMI signalling that she will issue a Public Interest Intervention Notice (PIIN) that would prompt regulators to investigate. She asked for more information about the complex arrangements and gave the parties until 3pm on Thursday to respond to her concerns.
The Barclay family are attempting to repay £1.2bn in overdue loans to Lloyds with new lending mostly sourced from Abu Dhabi royalty. RedBird IMI, a media investment fund, would be the vehicle for £600m of the total and would seek to immediately convert its loan into ownership of The Telegraph.
The Barclay family lost control of The Telegraph and The Spectator magazine in June. It has agreed new loans backed by Manchester City owner and UAE vice-president Sheikh Mansour bin Zayed Al-Nahyan. Redbird IMI is mostly funded by him and his business in Abu Dhabi would provide the balance of the debt directly to the Barclay family.
Sir Iain Duncan Smith, the former Conservative Party leader, said: “Of number one importance is editorial independence of The Telegraph, which is absolutely critical. It is one of our oldest newspapers and a significant newspaper of record. Many will be concerned at the thought that it could be handed over to a foreign government.”
Ms Frazer has said she is minded to intervene in the deal despite allegations of threats by Lloyds.
The bank’s chief corporate affairs officer Andrew Walton warned officials in the Department for Digital, Culture, Media and Sport (DCMS) that using powers to protect the public interest in free expression risked angering Lloyds’s powerful shareholders.
Sources close to the discussions on Monday said the comments were interpreted as a threat, an interpretation Mr Walton rejected.
He said: “We made abundantly clear to the Government the significant implications to us and to our shareholders of a PIIN at this stage. It was not a threat but it was a very clear warning.”
Lloyds is lobbying hard for the PIIN to address only the conversion of the RedBird IMI loan into shares and not the overall debt repayment plan.
The bank fears that a broad investigation would mean the funds are not delivered to the Barclay family in time for a court hearing in the British Virgin Islands on December 4.
If the December 4 hearing goes ahead, a crucial entity in the chain of ownership would be liquidated and there would be no prospect of a full repayment of the £1.2bn debt.