The company said it was making a one for four rights issue at 47.50 euros per share, which is 38.9 percent below Friday's closing price and dilutes the share capital by some 19.9 percent.
PARIS (Reuters) - Societe Generale, the French bank reeling from a rogue trading scandal, launched a rights issue at a steep discount on Monday to bolster its balance sheet.
The company said it was making a one for four rights issue at 47.50 euros per share, which is 38.9 percent below Friday's closing price and dilutes the share capital by some 19.9 percent.
It aims to raise 5.5 billion euros ($7.97 billion) and announced around 600 million in fresh write-downs.
The discount is steeper than some market participants expected, with fund managers reported last week to be seeking a discount up to 30 percent.
!ADVERTISEMENT!It compares with a 15.5 percent discount 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.
Based on Friday's closing price of 77.72 euros, the offer price implies a theoretical market value of 71.68 euros per SocGen share, Reuters calculates.
SocGen said the rights would have a theoretical value of 5.86 euros after an estimated dividend of 0.9 euros based on a payout of 45 percent against 2007 earnings. The dividend will be confirmed on the eve of its February 21 results.
The new shares will not be entitled to a dividend.
SocGen announced plans for the capital increase on January 24 when it unveiled 4.9 billion euros of rogue trading losses and 2 billion euros in writedowns for the subprime crisis.
It aims to boost its Tier One capital adequacy ratio to 8 percent.
The bank boosted its earlier provisional forecast for 2007 profits, saying it expected net income of 947 million euros. On January 24 it had forecast net profit of 600-800 million euros.
SocGen also said in a statement it aimed for a cost income ratio between 60 and 62 percent by 2009 and a return on equity of 19 to 20 percent.
(Reporting by Yann Le Guernigou, Nick Antonovics, Tim Hepher Marcel Michelson; Editing by Paul Bolding)
