HSBC Raises $17.7 Billion in U.K.’s Largest-Ever Rights Offer

April 6 (Bloomberg) -- HSBC Holdings Plc, Europe’s biggest bank, raised about $17.7 billion as investors bought 97 percent of the U.K.’s largest-ever rights offer.

HSBC sold the shares to existing investors for 254 pence each, 41 percent less than the close on April 3 in London. HSBC on March 2 said it would seek the money after its North American operation posted a 2007 pretax loss of $15.5 billion.

The London-based bank is now “well-positioned for the uncertain economic environment and for growth opportunities,” HSBC said in an e-mailed statement yesterday. HSBC will use the money to increase capital and finance acquisitions that fit with its strategy of expansion in emerging markets.

While HSBC has set aside about $53 billion to cover bad loans during the past three years, it has avoided taking U.K. government funding, unlike rivals Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc.

“This staves off by a very long way the day when they would have to go cap in hand to the government,” said Alan Beaney, who helps manage about $2 billion at Principal Investment Management in Sevenoaks, southeast England. “The real question is have they raised enough?”

The transaction lifts HSBC’s Tier 1 capital ratio, a key gauge of a bank’s financial strength, to 9.8 percent from 8.3 percent, within the company’s target range of 7.5 percent to 10 percent.

HSBC said it met with more than 350 institutional investors to promote the sale, which was taken up by more than 98 percent of its investors based in Hong Kong. Billionaire Li Ka-shing and Hong Kong investors are underwriting at least $1.1 billion of the offering, which closed on April 3 in London.

Share Performance

HSBC fell 5.3 percent to 434.5 pence in London on April 3. The shares have declined 42 percent during the past year, giving the company a market value of 52.8 billion pounds ($78.3 billion), bigger than RBS, Lloyds and Barclays Plc combined.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. were lead underwriters for HSBC. BNP Paribas SA, Credit Suisse Group AG, RBS, Citigroup Inc., Societe Generale SA, Intesa Sanpaolo SpA, Nomura and ING Groep NV, also underwrote the offering, according to a note sent to clients and obtained by Bloomberg.