Management at the emerging markets bank have now had to eat several courses of their own words.
Here’s the latest dish – a deeply discounted rights issue to raise £1.78bn.
Highlights:
30-for-91 terms at 390p
Temasek, the Company’s largest shareholder, is intending to take up its rights and is also participating in the underwriting of the Rights Issue
The other underwriters are J.P. Morgan Securities Ltd, UBS Limited and Goldman Sachs International
The Directors intend to take up their entitlements in full
The Issue Price of 390 pence per share represents a discount of 48.7 per cent. to the Closing Price on 21 November 2008, the last business day prior to the date of this announcement and a 41.6 per cent. discount to the theoretical ex-rights price based on that Closing Price.
Just last month the bank was confident it meet British regulatory expectations in terms of capital – Standard Chartered was “well capitalised and highly liquid,” and wouldn’t be needing any of that state-tainted money from HM Treasury.
Is it churlish to point out that if StanChart had raised money then it might have done so at about 700p, rather than 390p?
Possibly. “Capitalisation” and “liquidity” are proving to be fast-shifting concepts.
Using the June 30 balance sheet date, the cash call would have had the effect of raising the bank’s core Tier 1 ratio from 6.1 per cent to 7.4 per cent and total Tier 1 from 8.5 per cent to 9.8 per cent. Citing the fact that it is near its financial year-end, StanChart will also pay out the same level of final dividend (in absolute cash terms) as it would without the rights, although there is no guidance of future payouts.
This must be galling for chief executive Peter Sands. Back in February he is busy hailing the best year in the bank’s recent history:
We have weathered many difficult periods in our long history as a bank. I can assure you we have never been in better shape.
Trading remained “excellent” at the time of the AGM and still seemed remarkably strong at the half-year stage.
The analysts and investors call is at 9am GMT: +44(0) 20 8515 2302, no pin required.
One more oddity: the stock, which was trading 5 per cent lower at 722p in early trade, goes ‘ex-rights’ at the close on Monday in London, but not until Thursday in Hong Kong.
Related links:
Standard Chartered plans £1.8bn rights issue – FT story
Full rights document here.