HBOS Rights Issue Passed

Britain’s biggest lender's plan to sell £4 billion worth of new shares has won the backing of its small investors.

The move was passed by a meeting of HBOS shareholders at company headquarters in Edinburgh. All three proposals connected with the share sale - otherwise known as a rights issue - were supported by attendees, who collectively hold around 98 per cent of the lender's total stock.

Under the terms of the rights issue, existing shareholders can buy up the new stock at a discounted price of 275p per share. All investors are to retain the right to buy up two new shares for every five already owned, increasing their holding in the process.

The continuing financial fallout caused by the credit crunch has led to HBOS making the move, due to the volatility of the global financial markets and the currently expensive inter-bank lending rates make it harder for big banks to raise money. The sale of additional stock in a rights issue is therefore an attractive way of boosting revenue.

HBOS' rights issue follows the success of a similar move from rival RBS, which is facing similar credit crunch-related financial pressures. The Scottish firm launched a record £24 billion share sale last month - and sold around 97 per cent of its new stock.