Crédit Agricole turns to shareholders to raise €5.9bn cash

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Crédit Agricole, one of France's largest banking groups, will this week launch a discounted rights issue to raise €5.9bn (£4.66bn), as it becomes the latest European bank to turn to its shareholders for cash, following the onset of the credit crunch.

The bank issued a statement yesterday setting the terms of the issue at €15.3 a share on an ex-rights basis, which works out at a 31 per cent discount. The offer period starts on Friday and runs for just under three weeks.

The group said the size of the capital raising was dictated by its need to shore up its cash base "considering the uncertainty and the risks relating to the economic environment and the market".

The raising will be underwritten by 39 regional banks in France, which hold a majority stake of 54 per cent of the company, and have committed to subscribe to their full allocation and options not picked up.

The group confirmed it was considering a rights issue last month, after news leaked to local press. It added that it was preparing to sell off €5bn worth of assets after announcing €5.5bn in markdowns this year.

This comes after a series of banks across Europe have been forced to launch right issues because of the ongoing problems in the economy brought on by the credit crunch.

HBOS said today it would seek shareholder approval for a £4bn rights issue later this month. Royal Bank of Scotland is currently in the rights trading period, with shareholders deciding whether to take up their options, while Bradford & Bingley admitted this week it was to heavily discount its issue to get it away.

Earlier this year, the bank Société Générale launched a rights issue to stabilise its capital position after it fell victim to the biggest rogue trading scandal ever.