UPDATE 2-Prudential eyes Asia as banks join rights issue

* Seeks to broaden shareholder base in Asia

* Rights issue secures over $21 bln commitments -sources

* Syndication to close late Tuesday -sources

(Adds syndication, sources, byline, previously SINGAPORE)

By Daisy Ku and Myles Neligan

LONDON, March 2 (Reuters) - Britain's Prudential (PRU.L) has pulled in a range of banks to help it sell its $21 billion rights issue, sources familiar with the matter said, as it seeks to broaden its shareholder base in Asia.

The insurer, which will use the money to fund its $35.5 billion buy of AIG's (AIG.N) Asian life insurance arm, has secured more than $21 billion in subunderwriting commitments, with the syndicate due to be set later on Tuesday.

"They have a good strong list and large orders," said a banker trying to join a trio of banks working on the lucrative deal, consisting of Credit Suisse (CSGN.VX), J.P. Morgan Cazenove (JPM.N) and HSBC (HSBA.L). [ID:nLDE6202ER]

Prudential -- which will see the main focus of its business shift to Asia as a result of the deal -- is keen to align its investor base with its changing customer base, to provide long-term support for its stock.

Singapore's DBS (DBSM.SI), is among the banks invited to underwrite the deal, the sources said, adding they also expect Asia-focused Standard Chartered (STAN.L) and several Chinese and Singaporean banks to make it on to the list. A DBS spokeswoman declined to comment.

Prudential's banks could well find a ready group of wealthy investors lined up for any shares left on their books in Asia, as AIG initially prepared AIA for an Initial Public Offering (IPO) in Hong Kong.

"All the people who were going to buy the IPO will now buy into this because they want exposure to the insurance sector in Asia, and this is going to be the most obvious vehicle," one source familiar with the situation said.

Big rights issues, such as the $18 billion deal by HSBC itself a year ago, usually involve multilayered bank syndicates, with bookrunners and sub-underwriters sharing the risk that part of the equity is left unsold.

SOVEREIGN FUNDING

Singapore state investor Temasek Holdings [TEM.UL] has been talking to Prudential about helping to backstop the rights issue, one person familiar with the matter said.

Temasek declined to comment on what it said was market speculation. Prudential also declined to comment.

The Government of Singapore Investment Corp (GIC), the city state's biggest sovereign wealth fund, has a 0.5 percent stake in Prudential, one of the few large Asian institutional investors with a stake in the British insurer.

A GIC spokeswoman declined to say if they would participate in the rights offering.

Support from such wealthy investors could come in handy should Prudential face a stock overhang after lock-up periods expire from issuing $3 billion in mandatory convertible securities, $2 billion in preferred and $5.5 billion in new shares to AIG as part of the payment.

AIG can sell half of its new shares in one year and the other 50 percent in two years time.

Banks were also supporting Prudential because they are keen to sell its insurance products through their own branch networks in what is known as the bancassurance model.

"There has been strong support from a swathe of banks. A lot of the interest has been driven by Prudential's bancassurance relationships. Its partners have pitched up in support of a lucrative business," one of the sources said.

Fees are another driver, with Prudential paying as much as $735 million for the land mark $21 billion rights issue.

Credit Suisse, J.P. Morgan Chase and HSBC are to receive a base fee of 3 percent plus a 0.5 percent discretionary fees and banks joining the syndication are expect to share a slice of those fees. (Additional reporting by Saeed Azhar in Singapore and Victoria Howley in London; Writing by Douwe Miedema; Editing by Jon Loades-Carter)