Passing the Hat: Big Bank Style

Royal Bank of Scotland's $23.9B rights offering caps a week of monster capital-raising, at discount prices.

First came the multi-billion-dollar write-offs. Now, the latest measure of the depth of the credit crisis: gargantuan financing moves by some of the world’s largest financial institutions, desperately trying to shore up their capital and meet regulatory benchmark requirements.

The latest is the biggest so far. Royal Bank of Scotland, in a record securities issuance for the UK, is seeking $23.9 billion from shareholders in a rights issue.

Current investors will be offered 11 new shares for every 18 existing shares, at $3.98 a share, according to the Associated Press. The price is sharply lower than its closing price of $7.13 on Tuesday. One reason for its need for capital, according to press reports, is its heavy involvement in last year’s acquisition of ABN Amro, the giant Dutch bank.

The RBS action continues a string of bank seeking capital at a discount from prevailing stock prices.

Earlier this week, National City Corp. said it is raising of $7 billion, including $985 million of private equity capital from Corsair Capital, which specializes in the financial services industry. Under that financing, National City will issue 126.2 million shares of common stock at a purchase price of $5 per share, 40 percent below its previous closing price of $8.33.

CIT Group Inc. raised $1.5 billion, including the sale of $1 billion of common stock priced at $11 per share, down more than 18 percent from its closing price of $13.50 several trading days earlier. And earlier this month, Fort Worth-based private equity firm TPG led a consortium that agreed to purchase $7 billion of Washington Mutual securities for $8.75-a-share, a discount of 33.46 percent.

Meanwhile, Citigroup Inc. is offering $6-billion of “hybrid” bonds — the largest public debt offering ever for Citi, according to Bloomberg News. The struggling financial services giant said in a regulatory filing that the offering was at a fat, fixed rate of 8.40 percent for the first 10 years. After that, it will pay a floating rate.

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