By Ilan Brat
MADRID--Spain's Banco Popular Espanol SA (>> Banco Popular Espanol SA) said Saturday it would issue a huge amount of new shares to investors at a steep discount to its current price to avoid having to take state aid.
The country's sixth-largest bank by assets said the new shares in the rights issue would be priced at 0.401 euros ($0.51) each, and existing shareholders would receive rights to buy three new shares for each share they already own. Banco Popular's shares closed Friday at EUR1.12.
Earlier this fall, an evaluation of Spain's banking sector found Popular would have a capital shortfall of EUR3.2 billion under heavy economic duress.
The capital increase is part of an attempt to ward off a capital injection from the rescue fund of up to EUR100 billion that Spain negotiated with the European Union for its financial sector this summer. Banks with capital shortfalls and in need of EU funds must submit recapitalization plans that will be evaluated by Spanish and European authorities.
As part of its rights issue, which could be valued at up to EUR2.5 billion, Banco Popular said it had hired 15 banks to underwrite EUR2.08 billion of the increase. Five banks--Deutsche Bank AG (DB, DBK.XE), Banco Santander SA (SAN, SAN.MC), UBS AG (UBSN.VX, UBS), Bank of America Corp. (>> Bank of America Corp), and J.P. Morgan Chase & Co. (>> JPMorgan Chase & Co.)--will be global coordinators.
"We're aware that we're asking for sacrifice from shareholders," said Angel Ron, Popular chairman, during a special general shareholders meeting. "But without a doubt, this is an operation for the future, that assures our independence and profitability" and which will ultimately benefit shareholders that buy into the increase at attractive prices.
Write to Ilan Brat at [email protected]
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