* New Commerzbank shares to be offered mid-week - sources
* Bank will offer stock at a discount of around 50 pct
* Roughly 12 percent of Commerzbank shares shorted - Markit
* Commerzbank shares down 5 pct
(Rewrites first paragraph, adds background, share price, data
on share shortage)
By Arno Schuetze and Alexander Hübner
FRANKFURT, May 13 Commerzbank AG will
start its 2.5 billion euro ($3.2 billion) share sale this week,
offering a hefty discount in a move designed to help repay state
aid, two people familiar with the transaction told Reuters.
Commerzbank is joining a slew of European banks tapping
shareholders for fresh money, including Germany's bellwether
Deutsche Bank, Russia's second-largest bank VTB
as well as Greek and Spanish banks.
The banks are taking advantage of bullish equity markets as
European shares trade at five-year highs, while bank
shares have risen to around the two-year high they
reached in late January.
While Deutsche Bank raised 3 billion euros overnight last
month, placing new shares at the previous day's close, some
Commerzbank shareholders have said they are looking for a
considerable discount before buying the new shares, given the
fact that Commerzbank recently gave a muted 2013 outlook.
The subscription period for the new shares will start in the
middle of this week, the sources said on Monday.
Commerzbank will offer new stock at a discount of around 50
percent to the current share price, implying the new shares are
likely to be sold at around 5.50 euros each, the sources added.
Commerzbank, which last month secured shareholder approval
for the transaction, declined to comment. The lender has not yet
said what volume of new shares is plans to sell, only that it
plans to issue enough to raise its target of 2.5 billion euros.
Shares in Germany's second biggest lender lost 5 percent by
Hedge funds have invested heavily in Commerzbank over recent
months and roughly 12 percent of the shares have been used for
bets on a falling price, known as shorting, according to index
and data provider Markit.
Of the shares suitable for shorting, more than 70 percent
have been utilised for such bets, Markit said.
Borrowing Commerzbank shares for shorting currently costs
between 2 and 4 percent on an annual basis, up from a month ago
when it cost less than 50 basis points, Markit said, adding a
main driver for the activity was a desire to arbitrage the
Deutsche Bank, Citi and HSBC are organising the issue.
As part of the transaction, German bank bailout fund Soffin
will this week sell Commerzbank shares worth 625 million euros,
reducing its stake to roughly 18 percent from 25 percent.
According to sources familiar with the transaction, Soffin
will place the shares at close to the TERP of slightly above 8
Commerzbank intends to use the proceeds from the share issue
to repay some of the state aid it received in the financial
crisis and to strengthen its capital buffers to comply with
stricter bank rules.
In a 2008 bail-out, the German government took a 25 percent
stake in Commerzbank and also granted it billions in a
debt-equity hybrid dubbed a silent participation.
By repaying the silent participation held by the state and
insurer Allianz, Commerzbank will save annual interest
payments of roughly 200 million euros.
($1 = 0.7709 euros)
(Editing by David Holmes)