Despite an extension of the payment deadline of its recapitalization scheme announced earlier this month amid negative market sentiment, First Financial Holding Co’s (第一金控) successful completion of a NT$16.4 billion (US$539.3 million) rights issue on Monday underlines “strong state support” for the company, Fitch Ratings Ltd said yesterday.
Bank of Taiwan (臺灣銀行), the nation’s biggest state-run bank, and other state-controlled entities, such as Taiwan Tobacco and Liquor Corp (台灣菸酒公司) and Chunghwa Post Co (中華郵政), were among the major subscribers of First Financial shares.
The Ministry of Finance is the largest shareholder in First Financial, with a 14.9 percent stake. The latest rights issue would further increase government ownership in First Financial to above 30 percent, Fitch said.
“The rights issue would have been more challenging or even impossible to execute without the subscription from state affiliates, in light of the recent sharp stock market correction,” Jenifer Chou (周筱娟), an associate director at Fitch, said in an e-mailed statement.
First Financial announced on Monday that it had completed the sale of 800 million new common shares at NT$20.5 per share, raising NT$16.4 billion in fresh capital to strengthen the financial structure of its subsidiaries and fund the group’s future expansion plans.
The company also said it would move forward the share-subscription payments deadline to Oct. 3 from Oct. 7.
Earlier, on Sept. 14, First Financial said it would extend the payment deadline to Oct. 7 from the previously required period of Sept. 13 to Sept. 14. This happened after some investors failed to inject funds into the company in time, amid market worries over the eurozone debt crisis.
The rights issue price of NT$20.5 implied a 12 percent premium on the company’s closing share price of NT$18.3 on Monday. The stock yesterday closed 0.26 percent lower at NT$19.25 on the Taiwan Stock Exchange, falling 12.1 percent over the past month and 28.31 percent so far this year, stock exchange data showed.
Under the company’s plan, First Financial plans to inject NT$15 billion of the proceeds into First Commercial Bank (第一銀行) to bolster the bank’s Tier 1 ratio to 8.2 percent by end of this year, from 6.8 percent at the end of June.
The company also plans to inject capital of NT$500 million into First Venture Capital Co (第一創投).
Fitch said the injection would alleviate First Bank’s inherent weakness resulting from the bank’s high dividend payouts and modest operating profits.
The lender reported a net income of NT$6.6 billion in the first eight months, up 81.5 percent year-on-year.
“The cash call reflects the group’s proactive approach to improve its capital position, as it is the first state bank to have completed a public rights offering since the global financial crisis,” Chou said in the statement.
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