Ukrsotsbank AGM approves capital increase, share buyback

Ukrsotsbank (USCB UK) shareholders approved a share capital increase at an AGM last Friday: 5,708 mln new shares (45% of the current number) will be issued and sold at UAH 0.22/share, which is more than par value of UAH 0.10/share and slightly above Friday’s closing price of UAH 0.207/share. The ex-rights date is set for April 20. The bank plans to raise USD 157 mln, boosting its equity by 19%. UniCredit Group, Ukrsotsbank’s majority owner with a 95.4% stake, is expected to convert its USD 150 mln subordinated debt to Ukrsotsbank into equity. Shareholders also approved a share buyback at UAH 0.22/share from minority shareholders that voted against the capital increase and decide to sell their shares to the issuer. Shareholders representing 2.4% of total ordinary shares voted against the deal.

Olena Zuikova: As Ukrsotsbank remains well capitalized (CAR was 13.3% at end-2011, according to NBU methodology), we do not believe the upcoming capital increase is badly needed, especially as it only improves the structure of regulatory capital and will have a minor effect on total CAR. We think the issuance of new shares is value destructive for minority shareholders – we estimate BPS will decline 19% as a result of the deal. As minority shareholders are unlikely to subscribe for new shares, the stock’s free float might decline to 1.5% from the current 4.6% following dilution and the share buyback.