BankWest parent's $8bn rights issue flop

HBOS, the UK owner of Perth-based BankWest, today said shareholders agreed to take up 8.29 per cent of its $8 billion rights issue, increasing speculation that Perth-based BankWest could be up for sale.

In a statement to the London Stock Exchange, shareholders accepted just over 124 million shares prices at 275 pence each in the ₤4 billion issue, leaving underwriters Morgan Stanley and Dresdner Kleinwort to seek buyers for the remaining 1.38 billion shares.

HBOS, which is seeking extra capital to strengthen its balance sheet after heavy credit crunch writedowns, said the underwriters will have until tomorrow afternoon, London time, to procure subscribers for the shares.

".. the underwriters will not be obliged to endeavour to procure subscribers if, at any time prior to 4:30 p.m. on 22 July 2008, they are of the opinion that it is unlikely that any such subscribers can be procured at a price per New Share which is at least equal to the aggregate of the Issue Price of 275 pence per New Share and the expenses of procuring subscribers," HBOS said in the statement.

In March, WA Business News reported that HBOS was forced to deny it was in financial difficulty following rumour-fuelled selling of the company's shares, prompted by speculation that HBOS could follow the collapses of peers Northern Rock and Bear Stearns.

At the time, a BankWest spokesperson stressed the speculation was wrong.

"With a balance sheet of 660 billion pounds, HBOS is one of the strongest financial institutions in the world," BankWest spokesman and HBOS Australia head of corporate affairs Adam Connolly told WA Business News in March.

Since then BankWest has moved to reassure customers that the bank was safe despite the continued speculation of financial strife, while in June, HBOS faced further uncertainty after its share price fell below the 275p issue price in the $8.2 billion rights issue.

Despite the fall, HBOS proceeded with the rights issue.

The financial certainty surrounding the UK company has prompted speculation in Australia that BankWest could be sold to replenish HBOS' capital, with several Australian banks, including the National Australia Bank and the Commonwealth Bank, looking like potential bidders.