Barclays' £4bn share issue falls flat -- only 19pc sold
Barclays, Britain's third biggest bank, could only sell 19pc of its £4bn share issue to its existing investors and take-up of HBOS's £4bn is set to be much lower.
With shareholders shunning Barclays' capital raising amid fears about the banking sector, the Qatar Investment Authority will now be the bank's biggest shareholder, with a stake of about 6pc, after committing to buying the bulk of any shares left over from the offer. Barclays' offer closed on Thursday morning, too late to benefit from a change of heart among investors that sent the bank's shares above the 282p offer price.
Shares left from HBOS's fully underwritten cash call will be left with Morgan Stanley, Dresdner Kleinwort and sub-underwriting investors lined up by the investment banks to take a substantial slug of the unsold stock.
HBOS will announce the results of the rights issue, which closed yesterday, on Monday. Take-up is likely to come in substantially below that of Barclays' offer because HBOS has 2.1 million small investors holding 26pc of the stock, few of whom will have taken up their rights with the shares below the offer price.
HBOS's shares rose to 282p, above the 275p offer price, shortly after yesterday's 11am deadline for taking up the rights in its cash call. The bank's advisers will hope that optimism about the financial sector, driven by encouraging results from the US, persists. But the knowledge that the shares are going to come onto the market could cause an overhang on HBOS's stock, putting renewed pressure on the share price.
It is highly unusual for a rights issue to fail, but HBOS has been buffeted by a financial crisis that has caused panic about banking stocks.
This is despite the best efforts of the UK Financial Services Authority (FSA), which introduced new disclosure rules on short selling during the near-three-month offer period.
If most of the shares end up with the underwriters, it will be the biggest offering to fail since the stock market crash of October 1987, which left investment banks holding most of BP's £7bn share sale. HBOS declined to comment.
Analysts predicted that after HBOS's troubles and the chaos of Bradford & Bingley's £400m rights offering, banks will use dividend cuts and asset disposals to raise fresh equity if necessary. Fears persist that more capital will be needed if further write-downs from the credit fallout are combined with rising bad debts caused by the economic slowdown.
B&B's rights issue was given the go ahead by shareholders on Thursday.
The buy-to-let lender was the only bank whose shares fell yesterday, dropping 3.7pc, after it reported a sharp rise in mortgage arrears.
Home loans three months overdue jumped to 2pc of those under its covered bond programme in July from 1.78pc in June, the bank revealed yesterday.
- Sean Farrell
