DEALTALK-StanChart points way to 2-week UK rights issue

* UK aims to cut rights issue period to 16 days from 39

* StanChart to complete fundraising in 3 weeks

* Shorter timeframe will help as more cashcalls loom

By Steve Slater

LONDON, Nov 27 (Reuters) - Standard Chartered (STAN.L) moved into the second phase of its 1.8 billion pound ($2.8 billion) fundraising on Thursday, showing that quick rights issues are possible and deals next year could be completed in two weeks.

Britain this week unveiled plans to speed up the rights issue process to limit the period of risk a company faces during the cashcall.

A trio of banks -- Royal Bank of Scotland (RBS.L), HBOS HBOS.L and Bradford & Bingley BB.L -- suffered during rights issues this year as speculators took advantage of jittery markets to undermine confidence in the companies.

Each bank raised the cash, but the damage caused by the speculators helped bring them to their knees and each of the three was later bailed out in emergency rescue deals.

Pressure to speed up the process has intensified as banks and other companies may need more capital as an economic downturn deepens.

Barclays (BARC.L) sidestepped a rights issue when it raised 7 billion pounds this month, saying it wanted to avoid the risks of the process. It raised the funds privately but angered investors by not giving them first option on the deal.

Other companies have seen what happened to the banks and do not fancy a prolonged period of instability, bankers said.

"Companies don't want to be hung out to dry. Once they've decided, they need to move quickly," one banker said.

UK banks could need to come back for more capital if the economy falls into recession and bad debts jump. Other sectors that may need to consider rights issues include insurers, retailers and property firms, bankers said.

UK companies have raised 23 billion pounds from rights issues this year. Banks account for almost 17 billion pounds, including a record 12 billion by RBS, while Imperial Tobacco (IMT.L) raised almost 5 billion.

16 DAYS... OR LESS?

Standard Chartered's rights issue shows cash can be raised relatively quickly, and there's scope to cut the time-frame further if the rules are changed.

The Asia-focused bank launched its offer on Monday and will close it three weeks later on Dec. 17.

When HBOS raised 4 billion pounds in the summer it took almost three months from launch to close, during which its shares swung wildly. Just 8 percent of investors subscribed.

B&B's offer had to be restructured twice and took over three months in the end. RBS's offer took seven weeks.

Hedge funds and other speculators were blamed for targeting the trio by selling shares short during the volatile rights period and picking them up later at a knock-down price.

"Many of the problems that emerged within the financial sector capital raisings were caused or exacerbated by the duration of the rights issues process," a report by the Rights Issue Review Group said this week.

It wants to simplify the process and cut its duration to 16 days from at least 39 days now, possibly from early next year.

There are two clear ways to squeeze the timetable -- cut out a two-week process for shareholders to approve a deal, and reduce the rights issue trading period.

Companies currently need shareholder approval if they want to issue more than a third of their shares. Regulators want that ceiling to be raised to two-thirds, and are consulting with the Association of British Insurers on the proposal.

Standard Chartered did not need to call an EGM as its issue is for less than one-third of its shares.

The period for trading nil-paid shares could also be shortened to 14 days from 21 days, the UK review group said. Bankers said it could be shortened to less.

Longer term changes are also in the pipeline, which could see funds raised in a matter of days.

"The ambition should be to reduce the rights issue period to materially below 16 days," the review group said.

Other measures being considered include shortening the prospectus and an option used in Australia that captures institutional investors within a couple of days and gives retail investors a longer period. (Editing by Simon Jessop)