UBS raising $15.5B at deep discount
UBS AG said Thursday that it would raise $15.5 billion in a rights issue at a 31% discount below the current share price.
UBS (UBS), hard hit by its exposure to the U.S. mortgage market, said it will sell new shares at $20.09 each to existing shareholders, compared with the closing price of $29.31 on the Zurich exchange Wednesday.
Shareholders will receive one subscription right per share held, with 20 of the rights entitling the holder to buy seven new shares. The new rights will be tradeable, the bank said.
Vontobel’s Claudia Meier said the price was cheaper than she expected and the total issue of 760,295,181 new shares was fewer than she anticipated.
Helvea’s Peter Thorne noted that the amount of the issue was larger than the 15 billion francs initially targeted.
"Every little bit helps," said Thorne, adding that the new share price was in line with tepid market expectations.
Thorne said he expects a sizable turnover in the new shares because UBS’ traditional investors bought the stock as a risk-free investment, and UBS has not become a bank recovery stock.
UBS shares dropped 1.37% to $28.91.
The bank said the subscription rights will be traded from May 27 May through June 9 in Zurich and on the New York Stock Exchange.
The issue of new shares is fully underwritten by four major investment banks — Goldman Sachs Group Inc. (GS, Fortune 500), JP Morgan Chase & Co. (JPM, Fortune 500), Morgan Stanley (MS, Fortune 500) and BNP Paribas SA.
UBS on Wednesday finalized the sale of $15 billion in subprime and Alt-A mortgage assets to U.S.-based BlackRock Inc. (BLK, Fortune 500) as it tries to pare exposure to housing securities. The securities had a nominal value of $22 billion.
The capital hike is UBS’ second major injection of funds in recent months, after the government of Singapore’s fund and an undisclosed Middle Eastern investor pumped in 13 billion francs.
Filed under: legal by Wolf