* Offers 3-for-1 rights issue at 0.401 euros/share
* Price represents 76 percent discount from end-September
* Investment banks vouch for 2.08 billion euros
* Shareholders approve the plan
(Adds shareholder approval and reaction)
By Tomás Cobos
MADRID, Nov 10 Spain's Banco Popular
had to discount its 2.5 billion euro ($3.2 billion) rights issue
much more than expected in order to attract investor interest
and avert the need for European aid.
At a special meeting in Madrid on Saturday, big shareholders
backed the plan, seen as a key test of Spanish banks' ability to
tap markets, but some small investors voiced anger toward the
bank's management about the damage done to their investment.
The country's sixth-biggest lender has been one of the
hardest hit from a property bubble crash that produced billions
of euros in toxic real estate assets and was the largest
non-nationalised Spanish entity to fail a stress test in
The independent audit by Oliver Wyman showed Popular needed
an extra 3.2 billion euros to weather a serious economic
downturn, prompting the bank to announce the share issue in a
fight to remain independent.
Popular is offering three new shares for every old one at a
price of 0.401 euros each. This represents a 64 percent discount
to Friday's closing share price of 1.118 euros, much steeper
than the up to 55 percent discount expected by analysts.
Large institutions, including German insurer Allianz
, said they would vouch for at least 80 percent of the
Aside from the share issue, Popular has also scrapped its
dividend to clean up its balance sheet.
"We feel cheated by these two moves," shareholder Francisco
Velloso said at the meeting.
Popular Chief Financial Officer Jacobo Gonzalez-Robatto
flagged in October a discount of 50 percent, but Popular said on
Saturday it had to lower the final price to attract sufficient
investor interest in the deal.
The price is a 76 percent discount to the 1.701 euros the
shares closed on Sept. 28 when the Oliver Wyman audit revealed
the bank's capital shortfall.
Spain has been granted up to 100 billion euros of a European
aid package for its crippled lenders, but the Spanish government
has said it would only require 40 billion of the aid since some
banks could meet part of the extra capital needs themselves.
Aside from Popular's dividend suspension and capital hike,
shareholders complained about the shares' loss of value, which
many attributed to poor management. Popular's shares have
slumped 68 percent so far this year.
"This bank is sick. A little self-criticism wouldn't hurt,"
shareholder Angel Cereceda said. "I guess I'm pure
contradiction. I don't trust you but I'm going to subscribe to
this cash call. That's what a masochist I am."
Popular's nine-month net profit fell 38 percent to 251
million euros ($325 million) because of writedowns on property
losses and it has said it will book a loss of 2.3 billion euros
in 2012 due to more writedowns needed this year.
Still, Chairman Angel Ron defended his management and asked
for shareholder understanding as the bank tries to emerge from
Spain's worst economic crisis in decades.
"Despite increased uncertainty in the next two years and
very high economic risks, the most sensible option for this bank
is to continue its current business model," Ron said.
He said the bank intended to resume dividends in the second
quarter of 2013.
The rights issue is due to take place between Nov. 14 and
Nov. 28 with the new shares to begin trading on Dec. 6.
($1 = 0.7868 euros)
(Reporting By Tomas Gonzalez; Writing by Tracy Rucinski;
Editing by Toby Chopra)