Societe Generale to raise $7.1 billion to repay state bailout

Societe Generale, one of the oldest and the second largest bank in France after BNP Paribas said today that it is raising $7.1 billion (€4.8 billion) by issuing new shares to repay the French government and fund target acquisitions.

The move comes barely a week after BNP Paribas announced a $6.27-billion (€4.3 billion) share issue to repay €5.1 billion of bailout money it received from the French government during the height of the global credit crisis which began last year. (See: BNP Paribas to raise $6.27 billion to repay state loan)

In March 2008, Societe Generale raised €5.5 billion through rights issue to bolster its capital after its single futures trader Jerome Kerviel, made a series of bogus transactions that spiralled out of control in 2007 and early 2008, causing a loss of €4.9 billion to the bank.

The loss was the largest in the bank's history and much larger than rogue trder Nick Leeson's $1.3 billion losses through speculating on futures contracts that brought down the venerable Barings Bank in 1995.

Societe Generale said that its shareholders can buy two new shares for every nine held at €36 each, which is less by 31 per cent to yesterday's closing price.

The bank will earmark €3.4 billion of the share sale proceeds to buy back the €1.7 billion clas  B shares the French state took in May and another €1.7 billion in special securities it bought in December last year.