Shareholders shun HBOS rights issue

HBOS said shareholders bought just 8.29% of the heavily discounted stock offered under the scheme to help bolster the group's balance sheet.

It potentially saddles the rights issue's underwriters, Morgan Stanley and Dresdner, with more than £3.6 billion worth of the new shares.

The investment banks have the next two days to try to sell the stock for more than the 275p offer price, but with HBOS shares more than 2% down at or just under the 275p level, investor appetite may be limited.

The low take-up makes the issue one of the worst corporate fundraising outcomes since BP tried to raise £7 billion immediately after the stock market crash of 1987, when around 95% of stock ended up with underwriters.

HBOS's rights issue was launched back in April when the bank's share price was around the 500p mark. Shareholders were offered two shares at the knock-down price of 275p for every five held.

But since then the stock has plunged in value amid fears of further big write-downs in the sector and general economic gloom, severely dampening the appetite of investors to buy the new shares.

Shares in HBOS, which is Britain's biggest mortgage lender, went on to fall below the discounted rights issue price on several occasions ahead of last Friday's take-up deadline.

Most of the group's estimated two million smaller investors, who were created when the Halifax Building Society demutualised in 1997 and own more than a quarter of the shares, turned their backs on the cash call.

Richard Hunter, head of UK equities at Hargreaves Lansdown, said: "I don't think the 8% figure is in the least bit surprising given the share price has been under water for virtually the whole of the period leading up to the deadline on Friday."