Swiss bank UBS launched a deep-discount rights issue worth 16 billion Swiss francs ($15.55 billion) today, saying it would issue new stock at 21 francs per share, about one-third below its latest market price.
The issue price comes far below what some analysts had expected in recent weeks - when speculation centred around 24-25 francs per share - but still above the 17-20 franc price feared by some, which would have meant a massive dilution for existing shareholders.
UBS shares have shed more than 36% so far in 2008, forcing the bank to bring the emergency rights issue to market at a low level to ensure support.
UBS said it would issue over 760 million new shares, offering existing shareholders seven new shares for every 20 shares they hold.
UBS, Europe's hardest-hit bank by the sub-prime crisis, is busy restructuring and offloading distressed assets after heavy losses originating in US mortgage debt crisis forced it into two emergency capital-raising exercises.
The rights issue is set to see the fallen Swiss bank's capital raising measures, which include cash injections from Singapore and a Middle East investor, hit around 37 billion francs - almost the same as its $37 billion in writedowns from the crisis.
The group finalised a $15 billion deal to sell weakened mortgage-related assets to US fund manager Blackrock yesterday, in a deal similar to one used by Citigroup.
The rights issue has been fully underwritten by a syndicate of banks led by JP Morgan, Morgan Stanley, BNP Paribas and Goldman Sachs.
