Nedcor sets low rights issue price

JOHANNESBURG – South African bank Nedcor on Friday priced its rights issue at 45 rand a share – well below what investors had expected and signalling how keen it was to raise more than five billion rand to boost its primary capital.

Nedcor is the mother company of the Commercial Bank of Namibia. Nedcor said it would offer shareholders five new shares for every 12 held at a price of 45 rand each to raise 5,15 billion rand to bring its capital position in line with its peers and meet proposed new banking regulations.The rights issue price is a discount of 25 per cent from the closing share price on Thursday of 60 rand.The news sent Nedcor’s shares sliding more than 8 per cent but rebounded to trade flat at Thursday’s close of 60 rand.Nedcor was the top traded stock in Johannesburg.Analysts were surprised at the issue price, which they had expected to be around the mid-50 rand level.”Forty five rand is a bit of a surprise – it’s a lot lower than expected,” said one fund manager.”At these rates, I don’t know why anyone is charging an underwriting fee.”London-listed insurer Old Mutual owns 52,8 per cent of Nedcor and is underwriting 76 per cent of the issue.Merrill Lynch and Deutsche Bank are underwriting the rest.”The underwriters seem to be trying to make sure people take up their rights so that underwriters don’t end up with any additional shares.That’s why it was priced at 45 rand and not higher,” said JP Morgan analyst Jacques Badenhorst.Old Mutual CEO Jim Sutcliffe said the issue would put Nedcor in a strong capital position to carry its business forward.”Old Mutual is committed to taking up its rights in full, and may decide to further increase its stake if a suitable opportunity arises,” he added.Sutcliffe has said Old Mutual would want to maintain a free float in Nedcor of 30 to 35 per cent.Of the more than five billion rand Nedcor aims to raise, two billion rand will be repaid to Old Mutual for a loan it extended the bank in December and 500 million rand of other loans will also be repaid.The rights issue opens on April 13 and closes on May 7.The last day to trade shares in order to participate in the rights issue is April 1.Nedcor shareholders have already approved the issue.- Nampa-ReutersNedcor said it would offer shareholders five new shares for every 12 held at a price of 45 rand each to raise 5,15 billion rand to bring its capital position in line with its peers and meet proposed new banking regulations.The rights issue price is a discount of 25 per cent from the closing share price on Thursday of 60 rand.The news sent Nedcor’s shares sliding more than 8 per cent but rebounded to trade flat at Thursday’s close of 60 rand.Nedcor was the top traded stock in Johannesburg.Analysts were surprised at the issue price, which they had expected to be around the mid-50 rand level.”Forty five rand is a bit of a surprise – it’s a lot lower than expected,” said one fund manager.”At these rates, I don’t know why anyone is charging an underwriting fee.”London-listed insurer Old Mutual owns 52,8 per cent of Nedcor and is underwriting 76 per cent of the issue.Merrill Lynch and Deutsche Bank are underwriting the rest.”The underwriters seem to be trying to make sure people take up their rights so that underwriters don’t end up with any additional shares.That’s why it was priced at 45 rand and not higher,” said JP Morgan analyst Jacques Badenhorst.Old Mutual CEO Jim Sutcliffe said the issue would put Nedcor in a strong capital position to carry its business forward.”Old Mutual is committed to taking up its rights in full, and may decide to further increase its stake if a suitable opportunity arises,” he added.Sutcliffe has said Old Mutual would want to maintain a free float in Nedcor of 30 to 35 per cent.Of the more than five billion rand Nedcor aims to raise, two billion rand will be repaid to Old Mutual for a loan it extended the bank in December and 500 million rand of other loans will also be repaid.The rights issue opens on April 13 and closes on May 7.The last day to trade shares in order to participate in the rights issue is April 1.Nedcor shareholders have already approved the issue.- Nampa-Reuters