SHARES in AMP Ltd slumped today as concerns resurfaced about the troubled financial services group needing another capital injection.
The group reiterated that it was considering a rights issue, believed to be about $1.2 billion, if its plan to demerge its Australian and British businesses is allowed to proceed.
Its comments came as the Australian Financial Review newspaper reported that AMP would launch a capital raising in November and had hired investment banks Macquarie, Deutsche and UBS to put the finishing touches on the proposal.
AMP chief executive Andrew Mohl responded by noting that the company had already flagged the possible capital raising when it reported a $2.159 billion first-half loss last month.
He said that if the demerger was approved by regulators AMP would have to refinance its reset preference securities (RPS) and that one option would be to refinance the RPS into equity and/or other Tier 1 instruments.
"When AMP has determined the best way in which to refinance the RPS, full disclosure will be made," Mr Mohl said.
"However, the refinancing is also dependent on a number of other factors including agreement with regulators on the capital structures of the demerged entities and board approvals."
AMP's shares fell 18 cents or 2.64 per cent to $6.65.The stock has risen by more than 35 per cent to a four-month peak of $6.96 on September 1, five days after National Australia Bank Ltd launched an overnight raid on AMP's shares to build a stake of about five per cent.
The move sparked hopes of a takeover bid from NAB, which flagged it was interested in buying AMP's Australian operations once they were separated from its troubled British business. Analysts said today's comments by AMP reaffirming its need for another capital raising had perhaps distracted investors from their hopes of a takeover bid.
"I think people are sitting back and thinking it's going to be a long process," said one analyst, who asked not to be named."
The capital raising probably makes people nervous and it makes it look as though the demerger is a work in progress and makes people think it's not set in stone.
"AMP has had to carry out a string of capital raisings in recent months to help shore up the financial position of its struggling UK life companies.