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June 12, 2008

HBOS share price continues to endanger rights issue

by Gill Montia

Story link: HBOS share price continues to endanger rights issue

Yesterday’s fall in the share price of HBOS was followed by a further decline early today.

The group, which owns Halifax and Bank of Scotland, saw the value of its stock fall further below the 275p price of it £4 billion rights issue, although around midday the price rallied to 274p.

The issue price of 275p represents a 45% discount on the market price of the group’s stock the day before the rights issue was announced.

Investment banks Morgan Stanley and Dresdner Kleinwort are underwriting the fundraising and stand to retain large quantities of unsold stock if HBOS’ fortunes do not recover in time for the rights issue, five weeks from now.

HBOS will be providing an update on its trading performance next week and any marked improvement is unlikely before then.

The bank has a large number of small private investors because it was formed from the demutualisation of Halifax Building Society a decade ago.

Around 1.4 million shareholders are being offered the chance to opt for a cashless take-up of their rights which involves selling some of their entitlement to provide the cash needed to allow them to take up their remaining rights.


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