Investors shun HBOS rights issue

Investors have overwhelmingly rejected the opportunity to purchase new shares in HBOS following the closure of a rights issue by the organisation.

HBOS – which owns Halifax, the UK's largest mortgage lender – sold just 8.29 per cent of the £4 billion of shares offered under the scheme.

Shares in HBOS had been trading on the stock exchange for below the 275 pence offered price on the rights issue, making the new shares unattractive to investors.

However, the result is not necessarily negative for the company, with the remainder of the shares from the rights issue, which was announced on 29th April, now going to underwriters.

The two biggest underwriters – Morgan Stanley and Dresdner – have until 16:30 BST on July 22nd to find buyers for the shares at 275 pence, before they are forced to purchase them.

Yet, this may prove difficult for the financial houses.

Shares in HBOS were trading for over 500 pence when the rights issue was announced, and have seen a continued devaluation – along with the majority of the banking sector.

Continued pressure from the subprime housing market and resulting credit crunch has forced share prices down in the sector.

Last week, Barclays announced it sold just 19 per cent of its shares to investors following a rights issue.

However, the remaining stock has been sold to a range of overseas investors – including those from Dubai and China.

Chris O'Toole