LONDON/PARIS, Feb 29 (Reuters) – French bank Societe Generale will have a take-up rate of close to 100 percent for its deeply discounted 5.5 billion euros ($8 billion) rights issue, sources close to the deal said on Friday.
The one-for-four rights issue at 47.50 euros per share, to shore up its finances after $7 billion of losses it blamed on rogue trading, closes on Friday night.
“Everybody is confident the take-up rate here is going to be, if not 100 percent, is going to be pretty close to,” said one of the sources.
SocGen shares close 1.14 percent higher at 71.10 euros, up 9.4 percent from Feb. 21, when the rights issue started. SocGen rights closed at 5.79 euros each, up 41.2 percent from 4.10 euros on Feb. 21.
Institutional investors had said they were keen to subscribe to the new SocGen shares, given the deep discount.
Key shareholders including Groupama and French insurer CNP, which hold around 3 percent and 1.1 percent of the bank’s share capital respectively, have said they would take part in the rights issue.
French fund management company Montsegur Finance said it had signed up, and Montsegur Finance fund manager Gregory Moore said he had heard that the rights issue was going well.
“It’s going fairly well, thanks to the bid rumours which mean that everyone wants to buy the stock,” he said.
SocGen Chairman Daniel Bouton has also taken part, investing 1.5 million euros, according to the sources.
Morgan Stanley, JPMorgan, and SocGen’s own investment bank are the underwriters of the deal, while Credit Suisse and Merrill Lynch are co-bookrunners.
BANKS RAISE CAPITAL
Investment banks in the U.S. and Europe are racing to shore up their capital bases after being hit by huge subprime losses.
Shareholders of Swiss bank UBS this week approved the issue of $12 billion of convertible bonds to Singapore’s Government Investment Corporation (GIC) and an unidentified Middle East investor.
Some small shareholders had argued that UBS should make a rights issue instead because it was unfair that they cannot participate in the convertible bond.
Investment bankers expect there will be more rights issues from European banks in the coming months.
Millennium BCP, for example, has announced plans to raise 1.3 billion euros in an issue fully underwritten by Morgan Stanley and Merrill Lynch. The deal is expected to be launched in April.
SocGen is not totally out of the woods yet. Its U.S. residential credit exposure could result in a further writedown of 1.2 billion euros this year, according to Lehman Brothers.
Lehman analysts said a possible bid for the bank and a low valuation will be the main drivers for the shares going forward.
SocGen trades at 1.1 times 2008 book value, similar to French peer BNP Paribas, which a source familiar with the matter said was evaluating on a possible bid.