SocGen launches rights issue at deep discount

Société Générale, the French bank reeling from a trading scandal, launched a rights issue at a steep discount yesterday to bolster its balance sheet after losses due to the US subprime crisis.

The company said it was making a one for four rights issue at €47.50 per share, which is 38.9 per cent below Friday's closing price and dilutes the share capital by some 19.9 per cent.

It aims to raise € 5.5 billion and said its losses related to the US subprime crisis totalled €2.6 billion, including 600 million in write-downs that were not previously detailed.

The discount is steeper than some market participants expected, with fund managers reported last week to be seeking a discount up to 30 per cent. "It's a very, very low price. We were not expecting such a discount. It reflects the lack of demand in the market," one Paris-based share dealer at a foreign bank said.

The discount compares with the 15.5 per cent offered by rival BNP Paribas when it raised the same amount of funds to help finance the takeover of Italian bank BNL in March 2006.

"It's priced to go - they needed to get this out of the door, and that's a decent discount, even more than the press was indicating over the weekend," said a trader in London.

SocGen said the rights would have a theoretical value of €5.86 after an estimated dividend of € 0.9 based on a payout of 45 per cent against last year's earnings. The dividend will be confirmed on the eve of its February 21 results.