HBOS fundraising take-up expected to be low

| July 20, 2008 | 0 Comments

Reports in the Sunday newspapers have suggested that as few as 10% of shareholders have signed up to HBOS’ £4 billion rights issue.

The reports said the low take up would mean its underwriters Dresdner Kleinwort and Morgan Stanley would be left with £3.5 billion of unsold stock.

Furthermore, according to the Sunday Times, the low take up would represent one of the City’s worst fundraising exercises and would compare with BP’s £7 billion share issue scheme after the stock market crash of October 1987.

The rights issue was announced back in April in a bid to shore up HBOS’ balance sheet. Like many of its rivals, it is asking its shareholders for extra cash as a result of the credit crunch. Royal Bank of Scotland and Bradford & Bingley have all announced fundraising attempts to improve their balance sheets.

Last month HBOS, which is Britain’s largest mortgage lender, revealed that it had written off over £1 billion this year.

A 10% take-up for HBOS’ rights issue would be nearly half that for Barclays’ £4.5 billion share placing, which was confirmed late last week.

The outcome of the rights issue is expected to be confirmed tomorrow. A spokesperson for HBOS was unable to comment on the take-up.

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