Page last updated at 16:26 GMT, Thursday, 26 June 2008 17:26 UK

HBOS rights issue gets go-ahead

Halifax sign outside a branch of the bank

HBOS has won backing from shareholders for its 4bn rights issue after a majority of investors voted in favour of the banking giant's cash call.

At a meeting in Edinburgh, shareholders representing more than 98% of HBOS shares approved each of three separate proposals relating to the issue.

Existing shareholders can buy at a "discount" price of 275p per share.

The plan was first announced at the end of April, after write-downs due to the international credit crunch.

A free dealing service is being offered to the more than two million private shareholders in HBOS as part of the rights issue.

HBOS shares closed just above the rights issue price at 276p on Thursday, down 5.5% on the day's trading.

Discount offer

Private shareholders own about 27% of the bank's shares. Most of them have held shares since the bank's demutualisation in 1997.

With an average holding of 374 shares each, private investors can now buy two new shares for every five they already own.

That would amount to an average of 149 new shares each, at a cost of 409.75, if they take up their full right to buy the new shares.

The shares are being offered at a 45% discount to the market price of 495.75p the day before the rights issue was first announced.

Once bought, shareholders can then keep their new shares or sell them through a normal stockbroker.

But if shareholders do not wish to exercise their right to buy, then HBOS is offering them a free service to sell their entitlement to other potential investors.

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