Banco de Chile raises US$277mn during capital increase's preferential offer period

Wednesday, May 4, 2011

Banco de Chile (NYSE: BCH) has raised 129bn pesos (US$277mn) in the preferential subscription period of its US$500mn capital increase through issuing 2.08bn shares, equaling an 94% acceptance rate, CFO Pedro Samhan told a conference call.

On March 31, the bank closed the first leg of its US$500mn capital increase by raising US$186mn through the sale of 1.4bn shares. Investor demand exceeded the offer by seven times.

That portion of the capital increase was equivalent to a 1.6% equity stake in the company and corresponded to the share of the bank's controlling investment vehicle, LQIF, which decided to forego its option to give greater liquidity to the shares.

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LQIF controls 62% in Banco de Chile and is 50-50 owned by local holding company Quiñenco and Citi (NYSE: C).

The bank raised some US$92mn in the second leg of the preferential offer period, in which 815mn shares were offered to its other shareholders. This process ended April 29, with an 84% acceptance rate.

"The stock related to the non-exercised preemptive rights portion will be issued to the market on a future date," Samhan said.

The last part of the three-stage process will begin May 16. Subscription options for 1.17bn shares pledged to a bank unit called SAOS will be offered preferentially to SM Chile's shareholders during a 30-day period.

SAOS owns a 35% stake in Banco de Chile, which goes back to a central bank-led bailout during the country's financial crisis in 1982. The central bank must set the price for the subscription options, the bank said in a press release.

The capital increase is aimed at shoring up Banco de Chile's balance sheet and providing the bank with enough resources to outpace the system's growth over the next three years.

Banco de Chile is the country's second largest lender.