- Play video
SOCIETE GENERALE
Société Générale, 5.5 billion euro capital increase
Monday 11 February 2008
In the wake of the subprime crisis, French bank Société Générale announced the launch of a capital increase of 5.5 billion euros (8.0 billion dollars) as well as an additional 600 million euros in losses.
Monday 11 February 2008
By By Reuters
PARIS - Societe Generale, the French bank reeling
from a trading scandal, launched a rights issue at a
steep discount on Monday to bolster its balance sheet after
losses due to the U.S. subprime crisis.
The company said it was making a one for four rights issue
at 47.50 euros per share, which is 38.9 percent below Friday's
closing price and dilutes the share capital by some 19.9
percent.
It aims to raise 5.5 billion euros ($7.97 billion) and said
its losses related to the U.S. subprime crisis totalled 2.6
billion euros, including 600 million in write-downs that were
not previously detailed.
The discount is steeper than some market participants
expected, with fund managers reported last week to be seeking a
discount up to 30 percent.
"It's a very, very low price. We were not expecting such a
discount. It reflects the lack of demand in the market," one
Paris-based share dealer at a foreign bank said.
The discount compares with the 15.5 percent offered by rival
BNP Paribas when it raised the same amount of funds to help
finance the takeover of Italian bank BNL in March 2006.
"It's priced to go -- they needed to get this out of the
door, and that's a decent discount, even more than the press was
indicating over the weekend," said a trader in London.
Based on Friday's closing price of 77.72 euros, the offer
price implies a theoretical market value of 71.68 euros per
SocGen share, Reuters calculates.
SocGen said the rights would have a theoretical value of
5.86 euros after an estimated dividend of 0.9 euros based on a
payout of 45 percent against 2007 earnings. The dividend will be
confirmed on the eve of its Feb. 21 results.
The new shares will not be entitled to a dividend.
JPMorgan, Morgan Stanley and SocGen itself are book runners,
and Credit Suisse and Merrill Lynch are co-book runners
SocGen announced plans for the capital increase on Jan. 24
when it unveiled 4.9 billion euros of rogue trading losses and 2
billion euros in writedowns for the subprime crisis.
It aims to boost its Tier One capital adequacy ratio to 8
percent.
The bank boosted its earlier provisional forecast for 2007
profits, saying it expected net income of 947 million euros. On
Jan. 24 it had forecast net profit of 600-800 million euros.
SocGen also said in a statement it aimed for a cost income
ratio between 60 and 62 percent by 2009 and a return on equity
of 19 to 20 percent.
