UBS to raise $3.5 billion in capital through share sale

Switzerland's biggest bank, the troubled UBS, which expects to post a second quarter loss is planning to raise about $3.5 billion through newly issued shares from authorised capital to a small number of institutional investors at a price of CHF 13.00 per share.

The Basel and Zurich-based bank said late last night that it is offering nearly 300 million new shares at CHF 13.00 per share, mainly to a small number of European institutional investors, which is at a 6.9 per cent discount to UBS's European closing price of 13.97 francs yesterday.

The Swiss National Bank had been piling up pressure on UBS to raise its capital after posting the biggest annual loss last year and the biggest in Swiss corporate history after it wrote down more than $44 billion linked to subprime mortgages in the US.

In October, UBS was bailed out by the Swiss National Bank, when it received $5.3 billion of government money in the form of mandatory convertible notes, giving the Swiss government a nine per cent stake in the bank. (See: Credit Suisse rescues itself, UBS gets funds infusion)

The Swiss National Bank further gave UBS $54 billion with UBS adding another $6 billion and created a special state aid fund to enable the bank to transfer $60 billion worth of toxic assets from its balance sheet.

In April, UBS transferred its final installment of toxic assets to the fund, bringing the total to $38.7 billion. (See: UBS completes $38.7 billion transfer of toxic assets to state fund) 

Last week, the Swiss National Bank asked UBS, whose Tier 1 capital ratio was 2.56 per cent at the end of March, to increase its capital and maintain a ratio of at least 5 per cent.