Alexa
  • Directory of Taiwan

Royal Bank of Scotland says rights issue 95 percent subscribed

Royal Bank of Scotland says rights issue 95 percent subscribed

Royal Bank of Scotland Group PLC said on Monday that Europe's biggest rights issue was undersubscribed, with the bank's shareholders putting up around 95 percent of the cash it called for to bolster its finances after losses from the U.S. subprime crisis.
RBS, the first British bank to announce a rights issue after being hit by the global credit squeeze, said that shareholders bought 11.6 billion pounds (US$22.9 billion) of stock at 200 pence (US$3.95) per share.
That leaves the underwriters with an overhang of just under 5 percent of the shares on offer in the 12 billion pound (US$23.7 billion) issue. In a rights issue, a company raises fresh capital by creating and selling new shares to existing shareholders.
Banking stocks initially made some gains after RBS announced the results, reflecting relief that the take-up was relatively high. However, share prices later fell on fears that a less than full subscription could indicate other banks may struggle with their efforts to raise more capital in a tough market.
Of most concern is the cash call from rival HBOS, the parent company of mortgage lender Halifax, which has announced plans for a 4 billion pound (US$7.9 billion) rights issue. While RBS is dominated by big instutional shareholders who are usually broadly supportive of such measures, HBOS has the biggest non-institutional shareholder base in Britain, a factor that analysts believe could work against its attempt to sell more shares.
The increasingly turbulent banking sector has already been spooked by the announcement last week that Bradford & Bingley PLC, Britain's largest mortgage lender to landlords, was heavily discounting its own 300 million pound (US$593 million) cash call after a fall in its share price.
Bradford & Bingley dropped the size of the rights issue to 258 million pounds (US$510 million) and cut the price to 55 pence (US$1.09) per share from 82 pence (US$1.62) per share as it also revealed that it would sell a 23 percent stake to U.S. private equity firm TPG Capital to shore up capital.
Bradford & Bingley will seek approval from shareholders for the revised rights issue at an extraodinary general meeting later this month.
Analysts say HSBC Holdings, Britain's largest bank, and Barclays, its third largest, could be next on the roster of rights issues.
RBS announced its rights issue last month in a humiliating U-turn just months after chief executive officer Fred Goodwin said the bank did not need to raise cash.
RBS reserves have been depleted not only by the global credit squeeze, but also by last year's acquisition of ABN Amro, in which it led a consortium including Belgian-Dutch group Fortis and Spain's Banco Santander. Investors were critical of the euro70.5 billion price tag on the deal.
The 95.1 percent takeup matched the size of the shareholder vote in favor of the rights issue on May 14.
The remaining shares are held by underwriters Merrill Lynch, Goldman Sachs and UBS AG. RBS said they will be seeking subscribers for the overhang.
By early afternoon trade, RBS was down 3 percent at 238.5 pence (US$4.72), HBOS PLC was 2.8 percent lower at 321.5 pence (US$6.36) and Barclays was off 3.3 percent at 326.5 pence (US$6.46). Bradford & Bingley, which suffered a strong sell off last week, bucked the trend, rising 2.9 percent to 71.75 pence (US$1.42).


Updated : 2021-05-15 07:30 GMT+08:00