HBOS to reveal share issue result

Posted by admin on 20 July, 2008 under Business news | Be the First to Comment

Halifax Bank of Scotland (HBOS), the UK’s top mortgage lender, will reveal on Monday how many investors have opted to buy new shares in the business.

Media reports have suggested that shareholder support for the bank’s £4bn rights issue will be lukewarm amid concerns about its falling share price.

HBOS shares have been trading below the 275 pence per share offer price, making it unattractive for many investors.

But HBOS will still get the money as the issue is underwritten by top banks.

Share slump

This means that the underwriters – Morgan Stanley and Dresdner Bank – will end up owning a large chunk of the new shares until they can sell them on to other City institutions.

HBOS is one of the host of leading British banks to tap their shareholders for extra cash to strengthen their balance sheets as the fallout from the credit crunch continues.

The Royal Bank of Scotland has raised £12bn while Barclays has secured £4.5bn in new funding from a range of foreign investors.

But the HBOS cash call has come under particular focus because of the sharp fall in its share price in recent months.

When the bank launched its rights issue in April, HBOS shares were worth about 500p.

But its shares have fallen by more than 40% in recent weeks, making it cheaper for investors to buy existing shares in the market rather than take-up the new ones on offer.

HBOS shares rallied on Friday, closing up 5% at 282p, but could come under fresh pressure when the outcome of the rights issue is known.

The Sunday Times reported that as few as 10% of HBOS investors had subscribed for new shares by the time the offer officially closed on Friday morning.

It said most of the bank’s two million small investors had sidestepped the offer.

The gloomy outlook for the UK housing market and the economy in general has eroded investor confidence in leading banks.

But it has been claimed that HBOS has been particularly hit by the practice of “short-selling” where investors sell shares, thus forcing them down, only to buy them later for a big profit.

News reported by The BBC