* UKFI to sell further 7.5 percent of government's stake
* Sale will reduce government's holding to 25 percent
* Last sale was at a 3.1 percent discount to market price
* Price between 76 pence and 77 pence possible -sources (Adds further details, comment from Lloyds CEO)
By Matt Scuffham
LONDON, March 25 Britain will sell a further 7.5 percent stake in Lloyds Banking Group, worth about 4.2 billion pounds ($6.9 billion), via a placing to institutional investors, UK Financial Investments (UKFI) said on Tuesday.
UKFI, which manages the government's stakes in Lloyds and Royal Bank of Scotland, said the sale would trim the government's stake in Lloyds to 25 percent.
The government began to offload its 39 percent shareholding in Lloyds last September, selling off a 6 percent stake to institutions such as pension funds and insurers.
That sale was seen as a milestone in Britain's recovery from the 2008 financial crisis, during which taxpayers pumped a combined 66 billion pounds into Lloyds and RBS.
Britain's finance ministry said on Tuesday that its priority was "getting the best value for the taxpayer, maximising support for the economy and restoring private ownership".
"Building a stronger banking system is a core part of the government's long-term economic plan to deliver greater economic security," a Treasury spokesman said.
The first sale was priced at 75 pence per share, a 3 percent discount to the closing price of 77.36 pence on the date that it was launched, and ahead of the 73.6 pence price at which the government bought the shares.
Sources familiar with the matter told Reuters a similar discount to the market price is likely in the latest sale, with a price between 76 and 77 pence per share possible.
Shares in Lloyds closed at 79.11 pence on Tuesday.
UKFI is expected to sell more shares later in the year in an offer which will include private retail investors. Sources familiar with the matter say that UKFI believes an offer to retail investors will be easier to execute once there is greater clarity over Lloyds' dividends prospects.
The sale is a vindication for Lloyds' Chief Executive Antonio Horta-Osorio, who has restored the bank to profitability since his appointment in 2011, simplifying the business to focus on lending to UK households and businesses.
"This reflects the hard work undertaken over the last three years to make Lloyds a safe and profitable bank that is focused on helping Britain prosper," Horta-Osorio said on Tuesday.
Bank of America, Merrill Lynch, JP Morgan, Morgan Stanley and UBS have been appointed to act as bookrunners. Lazard also acted as an adviser to UKFI.
($1 = 0.6059 British Pounds) (Editing by Steve Slater and Mark Heinrich)