Natixis expected to set discount for rights issue

By Matthieu Protard

PARIS, Aug 25 (Reuters) - Natixis (CNAT.PA), France's fourth-largest listed bank, is expected to set a discount price for its 3.7 billion euro ($5.46 billion) rights issue although some analysts say Natixis might do better to set a premium.

Last month, Natixis said it would embark upon the rights issue to shore up its finances after booking 1.5 billion euros in writedowns related to the credit crunch during the second quarter.

The bank reports second-quarter results on Thursday and holds a shareholder meeting on Friday to vote on terms of the capital increase.

Natixis has already said that its first-half net profit before writedowns and other provisions is expected to be around 300 million euros -- implying a headline net loss of roughly 1 billion euros including writedowns.

Since French mutual banks Caisse d'Epargne and Banque Populaire together own about 70 percent of Natixis, the vote on the rights issue will be a formality.

However, this has not stopped other minority shareholders from opposing the plans, which could send Natixis' already battered share price even lower.

U.S. hedge funds Royal Capital Management and Greenlight Capital have opposed the rights issue saying it could dilute existing stakes by up to 50 percent.

PREMIUM PRICE RIGHTS ISSUE?

Natixis shares were down 2.1 percent at 5.94 euros in early afternoon trade on Monday -- down around 55 percent since the start of the year. The company has a current market capitalisation of around 7.5 billion euros.

Natixis was France's worst performing bank stock in 2007, when the shares fell 38 percent, and so far this year it has underperformed larger French rivals Credit Agricole (CAGR.PA), Societe Generale (SOGN.PA) and BNP Paribas (BNPP.PA).

The bank was hit particularly hard by the credit crunch since much of its business was in the securitisation sector -- an area hit by writedowns on complex debt instruments.

The stock also remains well below the 19.55 euros price at which it made its debut on the Paris bourse in December 2006.

Some analysts say that while a discounted rights issue remains the most likely option, there is a slim possibility that Natixis might set a rights issue price at a premium to its current share price in order to win over investors.

"There is a possibility that this rights issue will be set a premium (albeit a very small one) if management succeeds in convincing a partner to become a long-term shareholder," Oddo Securities said in a research note.

French state-owned bank Caisse des Depots (CDC) is seen as a likely candidate to help Natixis due to its political role as long-term investor in major French companies and due to its long-standing business ties with Caisse d'Epargne.

Asked to comment on whether it could play a role in the Natixis rights issue, a Caisse des Depots spokesman said: "For the time being, the Caisse des Depots has not been called upon to take part in the rights issue."

An analyst at a U.S. bank said a premium price would limit the writedowns existing shareholders would have to make on their stake and would also limit the dilution.

Fears that the global credit crisis could worsen have recently caused many banks and underwriters to struggle with capital raising plans.

A poorly received 400 million pound ($740 million) rights issue from UK bank Bradford & Bingley BB.L recently left six of Britain's largest banks with a near 20-percent stake.

Merrill Lynch MER.N and Credit Suisse (CSGN.VX) are working on the Natixis rights issue. Lazard-Natixis, a joint venture between the French bank and Lazard (LAZ.N), is also advising on the transaction.

(Additional reporting by Sudip Kar-Gupta; Editing by Jason Neely)