Underwriters to the HBOS rights issue were last night preparing to pick up the tab for the UK mortgage bank’s £4bn cash call after a fresh slump in the stock made it highly likely that shareholders would shun the fundraising.

HBOS shares fell as much as 13.5% in morning trade, and closed down 2% at 254.5p, 7.5% below the 275p subscription price. Investors have until tomorrow morning to take up their rights, but bankers said most would have made a decision by later today.

If the underwriters are forced to honour their commitment as buyer of last resort for the shares, it will be the highest profile offering to fail since the stock market crash of October 1987 left investment banks holding most of a £7bn share issue by BP.

Failure of the UK’s fourthlargest rights issue is also likely to add fuel to the debate surrounding this type of fundraising, with many bankers and investors calling for the rights issue timetable to be shortened.

Financial Times, Daily Telegraph