UBS Rights Offering at 31% Discount

123jump.com Staff
22 May, 2008
New York City

UBS, the Swiss private bank with significant presence in the U.S. finalized its offering of 760.29 million shares at Sfr 21 per share, a 31% discount from closing price a day ago. The offering will increase the outstanding shares to 2.9 billion and increase its Tier 1 ratio above 11. The bank has reported nearly Sfr 25 billion of losses in the last three quarter. UBS has declared the largest losses related to subprime lending of the total declared losses of $320 billion in the industry.

[R]10:15AM New York – UBS prices rights offering at 31% discount as nervous investors in Europe, Japan and U.S. participate in $15.5 billion offering.[/R]

UBS, the battered Swiss banker increased its outstanding count by nearly one third and sold at a discount of 31% to shore up its balance sheet after a string of losses in the U.S. mortgage market.

UBS finalized its terms of rights offering to place 760 million shares at a price of Sfr 21 to raise Sfr 15.9 billion. The deal was authorized the board at the annual general meeting on April 23 and the issue is fully underwritten by the syndicate of banks led by JP Morgan, BNP Paribas and Goldman Sachs.

The stocks holders with 20 shares will have a right to buy 7 shares in the new offering. The trading in the newly issued shares will begin on June 13. The subscription rights will trade from May 27 through June 9th of this year on the SWX in Switzerland and on the NYSE in New York. The newly issued shares will trade on SWX, NYSE and on the Tokyo Stock Exchange.

The deal comes on the heels of losses at the bank in the last three quarter. The bank only months ago completed Sfr 13 billion offering to maintain its Tier 1 ratio. In the third quarter of 2007 the bank lost Sfr 950 million followed by losses in the fourth quarter of Sfr 12.9 billion and in the first quarter of 2008 of Sfr 11.5 billion. The total reported losses in the three quarters are nearly Sfr 25 billion.

Several European banks have been forced to raise new capital to meet capital adequacy ratios after three quarters of punishing losses in the mortgage markets. In the UK, Royal Bank of Scotland and independent mortgage lender Bradford Bingley together have raised more than $15 billion. Societe Generale in Paris was forced to raise capital at 39% discount and RBS offered 41% discount to for its offering. In the U.S., AIG, Merrill Lynch and Citigroup have raised capital at a price between 20% and 50% lower than the peak of the stocks in 2007.

UBS stock in the morning trading in New York rose 52 cents to $29.86.