Browse Sections

• School league tables

Just 8pc take up cash call by HBOS

21/ 7/2008

BANKING giant HBOS revealed today that less than 10 per cent of shareholders took part in its £4bn rights issue.

The group said just 8.29 per cent of investors opted to buy heavily discounted shares, as part of the scheme to help strengthen its balance sheet.

It potentially saddles the rights issue's underwriters, Morgan Stanley and Dresdner, with more than £3.6bn worth of the new shares. They have the next two days to try to sell them at a profit, and will be forced to accept the stock themselves if they fail to do so.

The low take-up means it is the worst corporate fundraising exercise since BP tried to raise £7bn immediately after the stock market crash of 1987.

HBOS's attempt was launched in April, when its share price was around 500p. Shareholders were offered two shares at the knock-down price of 275p for every five held.

But the bank's stock has since plunged in value, amid fears of further big write-downs in the sector and general economic gloom, severely dampening the appetite of investors to buy the new shares.

Shares in HBOS, which is Britain's biggest mortgage lender, actually went on to fall below the discounted rights issue price on several occasions ahead of last Friday's take-up deadline.

Most of the group's estimated 2m smaller investors, who were created when the Halifax Building Society demutualised in 1997 and own more than a quarter of the shares, will have turned their backs on the cash call.

HBOS will get its hands on the £4bn as part of the underwriting deal. But if Morgan Stanley and Dresdner try to offload the stock on the market today and tomorrow, that could risk depressing the share price even more.

The eight per cent take-up rate for HBOS's rights issue is below the 19 per cent achieved by Barclays for its recent £4.5bn share placing.

Barclays, whose share price has also been buffeted during recent stock market turmoil, said a series of wealthy Asian and Middle Eastern investment groups picked up the remainder of the shares.

HBOS shares opened more than three per cent down today.