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HBOS plans £4bn rights issue

HBOS is planning a rights issue to raise £4bn of extra funding from existing shareholders in order to strengthen its capital base.

The lender says its enhanced capital position will allow HBOS to consolidate its position in residential mortgages and savings, deliver improved corporate growth, including international investments and to grow its insurance and investment markets.

This morning’s announcement explains 2 ordinary shares will be issued for every 5 existing shares at 275p a share and dividend payouts will reduce to 40 per cent, with the interim dividend paid out in shares and the final payment in cash.

Shareholders will be given the right to vote on the rights issue at an extraordinary general meeting, scheduled for late June, with the final date for acceptance and payment to be no later than August 7.

HBOS admits its nominal exposures at March 31 were £2.8bn of negative basis CDS and £2.3bn of wrapped bonds.

Group chief executive Andy Hornby says: “The actions we have announced today achieve a step change in our capital strength and our target ratios. This allows us to consolidate our competitive position in our core markets.

“We are planning for a more challenging environment ahead and the proceeds of the rights issue should ensure that we benefit from strong ratios even if the macroeconomic environment deteriorates further.

“In the long term we remain optimistic about the fundamental prospects for our core businesses. The group will be well positioned to benefit over time from a number of selective growth opportunities across our businesses where there will be scope to earn good returns.”

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