City advisers will pick up £25 million in fees backing Stephen Hester’s £773 million capital-bolstering rights issue for insurance giant RSA.
The bulk will go to Bank of America Merrill Lynch and JP Morgan Cazenove, which have fully underwritten the share issue — launched today — that ensures RSA gets its cash whatever happens to the market between now and the rights closing on April 9.
In the event, with RSA shares rising 1p to 93.45p, the underwriters do not look as though they are risking too much. The new shares have been issued at a 40% discount on a three new shares for every eight owned at a price of 56p.
The FTSE 100 insurer was forced to raise extra capital after it suffered a £220 million fraud in its Irish business. That led to the departure of former chief executive Simon Lee and, coupled with bad weather claims in the UK and Scandinavia, resulted in a loss of £244 million for 2013.
Hester, the former chief executive of taxpayer-controlled Royal Bank of Scotland, was brought in last month to lead the turnaround of RSA. The insurer today confirmed in its annual report that he could make as much as £5.64 million in 2014 if he hits demanding targets.
Hester said today: “The board believes the rights issue will enable the group to restore its capital position and keep ahead of anticipated industry capital trends.”
