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HBOS to raise £4bn in share sale HBOS to raise £4bn in share sale
(10 minutes later)
HBOS has announced plans for a rights issue to raise £4bn of extra funding from its existing shareholders.HBOS has announced plans for a rights issue to raise £4bn of extra funding from its existing shareholders.
The group, formed by the merger of Halifax and Bank of Scotland, said it was planning for "a more challenging environment ahead". The group, which has 2.1 million shareholders, said it was planning for "a more challenging environment ahead".
HBOS added it was writing off £2.8bn from the value of its investments linked to the US sub-prime mortgage market and the global credit crunch.
Last week, Royal Bank of Scotland announced it was planning to raise £12bn through a rights issue.
Banks have been suffering as a result of the impact of the global credit crunch which has affected the value of their investments and threaten the profitability of their businesses.
"Trading conditions in the first quarter of the year have been challenging against the backdrop of global financial market dislocation that is now impacting on the wider economy," HBOS said in a statement.
The bank said the extra funding would allow it to grow internationally and invest in its residential mortgage and savings business.
Discounted shares
HBOS is the most widely-held UK share, as a result of the Halifax building society's demutualisation in 1997. HBOS was formed by the merger of the Halifax and Bank of Scotland in 2001.
Existing shareholders will be offered two ordinary shares for every five existing shares they own at a price of 275 pence per share.Existing shareholders will be offered two ordinary shares for every five existing shares they own at a price of 275 pence per share.
Royal Bank of Scotland is also planning to raise £12bn through a rights issue. HBOS said it was offering the shares at a price that was 45% less than the closing price of its shares on Monday of 495.75p.
The bank said the funding would allow it to grow internationally and invest in its residential mortgage and savings business. Shareholders have until 7 August to decide whether to take up the offer.
HBOS has 2.1 million shareholders, making it the most widely held UK share, as a result of the Halifax building society's demutualisation in 1997. The announcement came ahead of the start of the bank's annual general meeting on Tuesday.