UPDATE 1-BCP shares jump after bank plans capital hike to repay debt

Wed Jun 25, 2014 6:45am EDT

(Adds analyst, updates share price, adds details)

LISBON, June 25 (Reuters) - Shares in Millennium bcp , Portugal's second-largest listed bank, soared on Wednesday after the bank said a major capital increase will be used to repay the bulk of pricey state loans.

The bank announced a capital increase of up to 2.25 billion euros ($3 billion) late on Tuesday.

Shares in the bank, which had lost more than 20 percent of their value since last week as investors anticipated the capital hike, opened sharply lower but then reversed and rose as much as 14.4 percent by 1005 GMT, when they traded at 0.1813 euros.

Caixa BI analyst Andre Rodrigues said he was surprised by the rise considering that the capital increase was higher than expected and a hefty 34 percent discount from the theoretical ex-rights price based on Tuesday's close of 0.1585 euro.

He said the bank's plans for using the capital increase to repay debt were apparently enough to offset the impact of a reduction in earnings per share.

"For the first time in many years in Portugal, a capital increase serves to repay debt, rid the bank of expensive loans, rather than plug holes," he said.

"Still, it's a big discount and dilution, so I'd say uncertainty remains around the future of the stock," he said.

BCP said it wants to repay as much as 1.85 billion euros in state loans held in so-called contingent convertible (CoCo) bonds that carry high interest and weigh on earnings.

The bank took 3 billion euros of state loans at the height of Portugal's debt crisis in 2012. Earlier this year it decided to repay 400 million.

Traders also said the gains in the shares came on the view that the shares had fallen a lot ahead of the announcement and that the discount should guarantee the fundraising's success.

"The early repayment of CoCos is good news and investors are clearly happy to see the bank going to the market to seek cash at more attractive terms," said Jose Novo, a trader at brokerage Orey iTrade.

The offering follows a successful, but smaller, capital hike by Portugal's largest listed bank, Banco Espirito Santo BES.LS, that raised 1 billion euros earlier this month after attracting strong demand. ($1 = 0.7355 Euros) (Reporting By Andrei Khalip and Filipa Cunha Lima; Editing by Erica Billingham)

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