UPDATE 1-Resona to issue 100 bln yen in shares to Dai-Ichi

Fri Jul 20, 2007 6:02am EDT

(Adds details)

TOKYO, July 20 (Reuters) - Resona Holdings Inc. (8308.T) said on Friday it will issue 100 billion yen ($820 million) in preferred shares to Dai-Ichi Mutual Life Insurance Co. as Japan's fourth-largest lender looks to repay more than 2.3 trillion yen in public funds.

Sources told Reuters last month that the two were in talks about the issuance, which has been expected by the market.

Dai-Ichi and Resona also said in a joint statement that they would work together on the marketing of insurance products, as the bank prepares for a regulatory change at the end of this year that will allow the full sale of insurance products at bank branches.

Currently, lenders are allowed to offer a limited range of insurance products, such as variable annuities.

The preferred shares will not be convertible to common stock and will pay a yearly dividend rate of 3.675 percent.

A Resona official told Reuters the two companies will also discuss the possibility of Dai-Ichi raising its stake in the bank by buying common stock.

The official declined to mention a time frame or the amount of common stock likely to be bought.

Sources told Reuters last month that Dai-Ichi may raise its stake in the bank to around 5 percent by buying common stock in the bank from the Japanese government.

The life insurer would then become the second-largest shareholder in the bank, behind the Japanese government.

Currently, Dai-Ichi holds a 0.9 percent stake in Resona.

Japan's government paid 300 billion yen for its Resona common stock as part of a bailout of the bank in 2003. Those shares now have a market value of about 1.7 trillion yen.

Resona was effectively nationalised during its bailout. It received about 3 trillion yen from the state, including earlier bailouts of predecessor banks in 1998 and 1999. It has repaid some of that but still owes about 2.3 trillion yen.

($1=122.17 Yen)

((Reporting by Taro Fuse and David Dolan, editing by Mike Miller; Reuters Messaging: david.dolan.reuters.com@reuters.net; +81-3-3432-9911; david.dolan@reuters.com)) Keywords: RESONA DAICHI

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