AMP, the beleaguered Australian financial services giant, yesterday confirmed that it might launch a rights issue to help it raise money as part of its demerger plan which will see its UK businesses, including Henderson Global Investors, hived off into a separate company.
The company said no decision had yet been taken, but it may try to raise am much as A$1.2bn (£513m) through a rights issue in the next couple of months, ahead of its target date of splitting the business in two in December.
AMP, whose shares have been on a roller coaster ride in the past two months, is still trying to get approval from the Financial Services Authority and from Australian regulators to carry out the split.
Most City observers believed the company's position was that it had enough money to finance the demerger just by selling off assets. The company has already raised A$1.75bn to plug holes in its balance sheet through a share issue to institutional and retail investors.
However, the company responded to speculation by saying that "one of the alternatives being considered is a rights issue".
The company said that if it did press ahead with the plan, the money would be used to buy back A$1.2bn of shares known as reset preference securities, which are similar to debt.
AMP said its purpose in buying back the shares was for tax reasons, because following the demerger the group would not benefit from relief on the interest it pays on them.
AMP has been keen to satisfy the FSA that it has enough capital to push through its plan to spin off its UK division, which contains a series of businesses which have haemorrhaged cash. It emphasised that it was not being pushed into a possible rights issue by the regulator.
AMP is expected to hand a blueprint for the demerger to the Australian Securities and Investments Commission this month.
The size of the proposed rights issue could change depending on the success of asset sales.
AMP has become a takeover target since problems emerged with the performance of its UK businesses, which include Pearl and London Life. National Australia Bank has made clear its interest in buying its Australian rival. Old Mutual, the South African financial services giant, is also widely thought to be circling the UK assets since it is keen to expand in this country.
AMP said any money raised via a rights issue would only be used to buy back the preference securities. It maintained that it would not have to bolster its life funds with the cash.Reuse content