Hansapank rearranges stock issue

  • 1998-09-24
  • Kairi Kurm
TALLINN - The Hansapank council was supposed to go ahead with the bidding process that would allow one strategic investor to buy into the bank.

But instead, Swedbank, already a 30 percent owner in Hansapank, convinced the board at the last minute to rearrange the planned stock issue so that all Hansapank shareholders have an opportunity to increase their stake.

According to the Swedbank's plan, the shareholders of Hansapank may buy one new share for every four shares already owned. Swedbank said it would guarantee the issue of 14 million shares at a price of 100 kroons ($7) apiece. If shareholders don't use their right to subscribe, Swedbank automatically assumes all shares at this price.

If this were to happen, Swedbank officials announced that the company would start consultations with Hansapank's board to reduce its large holding in the Estonian bank. Swedbank officials and others fear Hansapank shares will become less attractive to large potential investors if one company has too large a share, thus hindering trading.

But according to specialists, it is very likely that Swedbank may have to buy the whole issued stake, as investors might not be interested in buying the issued shares at a price that is 20 percent higher than their current market value.

The board and council of Hansapank have decided to support Swedbank's proposal to rearrange the planned issue and call an extraordinary shareholders general meeting in a month. Hansapank has also announced that other possible suggestions are still welcome. Skandinaviska-Enskilda Banken (SEB), which planned to increase its 18 percent stake to 33 percent, has not commented on its competitor's action. According to Estonian press reports, most of Hansapank's board members saw SEB as a likely strategic investor.

The European Bank for Reconstruction and Development (EBRD), a large shareholder in Hansapank, has announced that it supports Swedbank's course of action. The rights issue is the only possible way for EBRD to increase its stake in the Baltic's biggest bank since EBRD does not buy shares from the market and does not take part in auctions.

EBRD may have a possibility to increase its present 4 percent stake in Hansapank next year, if the shareholders of Hansapank agree to convert Hansapank's loan into the bank's stock capital.

Hansapank and EBRD signed an accord Sept. 16, whereby EBRD has until June 30,1999 to propose that Hansapank's 35 million DM loan be converted into Hansapank shares. The conversion price will be 95 percent of the average price of the shares over 30 trading days preceding the EBRD's announcement.

Hansapank and EBRD also signed an agreement on a 10-year subordinated loan of 10 million DM. The rest of the 25 million DM loan was received earlier.

The aim of this loan is to improve the bank's capitalization, which due to a postponed share issue, is very close to the minimum level. The bank's capital adequacy rate was, according to the Estonian business daily Aripaev, 10.6 percent in August, while the minimum permissible level is 10 percent.