HBOS shareholders shun rights issue with 8.29% take-up

by Gill Montia

Story link: HBOS shareholders shun rights issue with 8.29% take-up

HBOS has revealed that only 8.29% of shareholders have taken up their rights in the bank’s £4 billion fundraising.

The rights issue is underwritten by Morgan Stanley and Dresdner Kleinwort who are now faced with placing £3.5 billion worth of the group’s stock.

Shares in the bank have this morning been trading at 3p below the rights issue price, at 272p, and the underwriters have only two days in which to complete a placing, following which any remaining HBOS stock must be taken onto their balance sheets.

According to HBOS, the outcome is satisfactory because the bank has the raised £4 billion of capital needed to bolster its Tier one ratio, which is currently 5.7%.

The group expects to increase this to up to 7% by the end of the year and take its place as one of the best capitalised banks in Europe.

However, the low level of take-up is hugely embarrassing to the board of HBOS and will cause a headache for Dresdner Kleinwort and Morgan Stanley, although it is customary for lead underwriters to insure against being left with a large number of shares.