UBS announces £7.9bn rights issue

Swiss banking giant, UBS, has revealed plans for a SwFr16 billion (£7.9 billion) rights issue in a move to shore up its balance sheet.

The announcement from the Swiss bank, which is the biggest European casualty of the credit crunch so far, comes just one day after it sold some of its mortgage-backed securities to BlackRock, the US fund manager.

The rights, which are fully underwritten, will be offered to existing shareholders at a discount of over 30%. If successful, UBS will also raise nearly $1 billion more than expected.

The rights issue represents the third largest on record, behind a €15 billion cash call by telecommunications giant, France Télécom in 2003, and the current rights issue from the Royal Bank of Scotland who are looking to raise £12 billion.

Other UK banks to announce rights issues include Bradford & Bingley and HBOS who are looking to raise £300 million and £4 billion respectively.

Earlier this month, UBS announced plans to axe 5,500 jobs as a result of the global credit squeeze. The job cuts represent approximately 7% of its workforce.

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