HBOS falls below rights issue price

HBOS falls below rights issue price

Pressure was mounting on HBOS this afternoon after its shares fell below the price at which it is planning to raise £4bn in a cash call on investors.

Shares in the country's biggest mortage lender closed at an all-time low of 258p, well under the 275p rights issue price. Today's near-12% fall in the HBOS share price came amid mounting concerns that the housing market is wobbling under the pressure of the credit crunch. Housebuilders' shares have also fallen sharply this week following data from the surveyors body RICS which showed that house sales are at their lowest level since it began collecting data in 1978.

With six weeks to go before HBOS is due to complete its cash call, the bank may now face pressure to restructure its rights issue. Bradford & Bingley was forced to take the unprecedented step of repricing its rights issue a fortnight ago when its shares traded close to its rights issue price and it issued a profits warning.

The share price drop forced the bank to issue a stock market announcement this afternoon.

"Further to its statement dated June 1 2008, HBOS confirms that its fully underwritten rights issue is proceeding according to plan and that it will issue a prospectus and detailed trading update on the week beginning June 16 2008. Current trading and specifically mortgage arrears performance is in line with the group's expectations," HBOS said.

But despite this statement, the share price did not recover today.

guardian.co.uk.....continued below

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