Swedbank announces massive rights issue

Swedish bank Swedbank has announced a 15 billion kronor ($2 billion) guaranteed preferential rights issue, according to a company press release on Monday.

The bank explains that the share issue is being conducted to strengthen core operations.

Insurance firms Folksam Liv and Folksam Sak have together guaranteed 2 billion kronor of the proposed issue, according to the press release.This equates to their current share holding plus an additional amount.

Folksam Liv, which currently owns 6.3 percent of Swedbank, has committed itself to signing up to a maximum of 300 million kronor in newly issued shares if other owners decline.

The insurance firm’s guarantees therefore amount to a total of 1.360 billion kronor.

Folksam Sak currently controls 2.3 percent of Swedbank stock and is thus committed to investing a further 340 million kronor in the bank which has been hit hard by the credit crisis and problems in the Baltic states.

The firm has also committed itself to spending a further 300 million kronor in the rights issue.

“Even with the realization of the full guarantees Folksam Liv and Folksam Sak’s exposure to the banking sector would be in line with existing policy in the respective companies,” according to the press release.

Swedbank conducted a new share issue worth 12.4 billion kronor only last autumn, which shook up the company leadership more than anticipated.

New major share holders, such as Austrian Erste Bank and Svensk Exportkredit, suddenly appeared after the Sparbank foundations were unable to withstand the pressure from a falling share price.

Swedbank will hold an extraordinary board meeting on September 15th when a decision will be taken on the rights issue. The price for the issue will also be set at the meeting.

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