"“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” "

Chinese premier Wen Jiabao 12th March 2009

""We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."

Timothy Geithner US Secretary of the Treasury, previously President of the Federal Reserve Bank of New York.1/3/2009

Thursday, May 22, 2008

Banks Rights Issue - Failure will give Mervyn the Moron a nasty jolt

Royal Bank of Scotland (LSE: RBS.L ), HBOS (LSE: HBOS.L) and Bradford and Bingley (LSE: BB.L ) have all announced major rights issues.

RBOS shares now trade at around 241.5 worryingly close to the 200p RBOS said it will charge for the newly issued shares when announced only 4 weeks ago on 22nd April.

Underwriters UBS , Goldman Sachs and Merrill Lynch , look increasingly likely to be left with a sizeable chunk of unsealeable shares if shareholders don't take up their rights, leaving a stock overhang for years.

Bradford and Bingley made a £300Mn cash call on share holders on 14th May when shares traded at 135 p. Today they opened at 100p and are up a few pennies against the 82p issue price it put on the new shares. Underwriters Citi and UBS must be feeling very edgy although even they are left holding all the shares - except the ones the Directors have bravely agreed to take up - it is not a mjaor disaster.

HBOS made a rights issue to to raise £4Bn at the end of April when shares were at 492 p and are today trading at 445.5p, against the 275 p rights issue. The issue is fully underwritten by Dresdner Kleinwort and Morgan Stanley

Shares in all three banks have lost more than half of their value in the past year.

What it does do is emphasise how tight money is for the merry bankers who were so happy until last May to lend to all and sundry whilst the Bank of England, the Financial Services Authority and Messrs Brown and Darling slumbered.

There are 35 issues in the pipeline in Europe for raising funds totalling some US$100Bn.

UPDATE : WED May 28th HBOS closed @431p , B&B @ 97.25p RBS @ 238p

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