Newspaper article The Evening Standard (London, England)

Fury Grows in the City at Mounting Bank Charges

Newspaper article The Evening Standard (London, England)

Fury Grows in the City at Mounting Bank Charges

Article excerpt

Byline: Simon English and Robert Lea

THE City's grandest investment banks are risking a backlash from clients who are irritated by the [pounds sterling]1.5 billion charged this year for simple share placings and rights issues.

Bankers are exacting increasingly large fees to underwrite the deals, claiming that there is a higher level of risk that the sales won't attract enough investors.

If not enough sign up, the banks are left holding millions of pounds' worth of shares which they do not want.

But most recent fundraisers have been for companies that are doing well and seeking cash to expand on the advice of investors, rather than for crisis-torn firms whose offers investors might have shunned.

Yet the banks are still charging up to 6% of the amount raised compared with the 2% they historically invoiced. That means large chunks of investors' money are going to investment banks rather than into the companies.

Industry figures show that UK listed businesses have raised around [pounds sterling]40 billion this year, with the banks taking fees totalling about [pounds sterling]1.5 billion.

Some companies are being forced into expensive rights issues because banking facilities such as overdrafts are becoming more expensive.

Yesterday industrial group GKN launched a deeply discounted [pounds sterling]423 million fund raiser, which cost [pounds sterling]20 million -- almost 5% -- in fees.

It decided that this was cheaper than trying to renegotiate a [pounds sterling]350 million overdraft. "The terms being asked for by the banks on the credit facility were extremely onerous," said a spokesman. "The cost of refinancing was not in shareholders' interests."

Although chief executives are reluc-tanto openly criticise powerful bank-erwhose support they may need in future takeover battles, in private some are fuming. …

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