Underwriting ABN

Published: June 4 2007 11:53 Last updated: June 4 2007 22:20 (source www.ft.com)
“Money’s too tight to mention” warbled Simply Red. The consortium bidding for ABN Amro has found the opposite is true. It has faced relentless sniping about the financing of its €71bn offer. It stresses that the capital raisings are “fully underwritten”. But what does that actually mean?
Precise detail remains limited but the broad thrust is that Merrill Lynch would act as the lead underwriter for the rights issues for Fortis and Santander, as well as for Royal Bank of Scotland’s preference shares and Santander’s mandatory convertibles. The rest of the funding – through disposals and debt facilities – cannot be underwritten but accounts for only a small portion of the deal. It is likely, therefore, that Merrill is on the hook for funds in excess of half its market capitalisation.

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