Banks to benefit from Prudential rights issue fees, reports claim

20 May 2010

The banks underwriting the Prudential’s £14.5 billion ($21 billion) rights issue could receive as much as £8.5 million in fees, newspaper reports have claimed.

Credit Suisse, HSBC and JPMorgan are the three financial service providers working with the insurer to back the deal.

The rights issue is thought to be the largest undertaken in corporate history and is being launched to fund the firm’s £24.5 billion takeover of the Asian division of the American International Group, AIA.

According to the Prudential’s prospectus for the transaction, the banks are entitled to a 3.5 per cent fee from the issue.

Up to £500 million of the fees related to the issue will be tied to currency hedging, the reports show.

In the statement, the firm said: “The total costs and expenses payable by Prudential in connection with the negotiation, preparation and implementation of the transactions ... amount to approximately £850 million.”

The rights issue was launched by the Prudential earlier this week after concerns over capital reserves from the Financial Services Authority caused delays.

A decision on whether the acquisition goes ahead will be made on June 7th.

By Jim Ottewill

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