Commerzbank issues shares at big discount

COMMERZBANK, Germany’s second biggest bank, yesterday announced plans to raise €5.3bn (£4.6bn) by selling new shares to repay state funding.

The issue price comes at a 45 percent discount to Friday’s closing price of €3.95, and 30 per cent below the the theoretical ex-rights price (TERP).

The bank stated it will sell 2.44bn new shares at €2.18. Shareholders will be allowed to sign up for 10 new shares for every 11 already held from 24 May to 6 June, the company said.

The rights issue is part of a series of measures Commerzbank plans to use to return €14.3bn of the €16.2bn the state injected into the bank during the financial crisis. This will help free the bank from government controls such as a cap on bonuses.

Since the beginning of May, Commerzbank shares have lost around 12 per cent in value.

Banks had guaranteed the full volume of the proceeds and negotiated the discount on the new shares prior to the announcement of the capital measures in April.

Germany took a 25 per cent stake in Commerzbank and full ownership of Hypo Real Estate during the crisis.

It also invested in so-called silent participations, a form of non-voting capital, in Commerzbank, Aareal Bank and WestLB. The €5.3bn Commerzbank intends to raise includes the state Financial Market Stabilisation Fund’s partial contribution of its silent participations, the bank said yesterday.