UPDATE: DnB NOR Prices $2.5 Billion Rights Issue At Discount

Norwegian lender DnB NOR ASA (DNBNOR.OS) Thursday priced its previously announced 14 billion Norwegian kroner ($2.49 billion) rights issue at a 31% discount to its shares' last closing price.

Norway's biggest lender is raising the funds to buffer its balance sheet against anticipated higher capital adequacy requirements in the banking sector after deciding against tapping the Norwegian state's banking sector rescue fund.

DnB said it has set the subscription price at NOK47.30 a share, with existing shareholders receiving two subscription rights for each nine existing shares held. One subscription right entitles the holder to subscribe to one new share, the company said.

The price represents a 31% discount to the NOK68.35 closing price of its shares Wednesday but a 26.7% theoretical ex-rights discount, the estimated price after subscription rights.

Nordic peers Swedbank AB (SWED-A.SK), Skandinaviska Enskilda Banken AB (SEB-A.SK) and Nordea Bank AB (NDA.SK) priced their rights issues earlier this year at around a 40% ex-rights discount.

"Given the positive market developments since this spring, when several of the Swedish banks had their rights issues, and given that the government has underwritten one-third of the rights issue already, I think this is a fair price and in line with expectations," said Artic Securities bank analyst Fridtjof Berents, who has a NOK75 target price and buy rating on the stock.

He expects shareholders to approve the terms of the rights issue at an extraordinary general meeting to be held later in the day.

"I think this will go ahead as planned," he said.

The issue is underwritten by DnB's main shareholders, including the Norwegian government which owns 34%, and by a bank syndicate of Morgan Stanley and Citi.

Shares in DnB have more than doubled in the past year amid renewed investor risk appetite for bank stocks. Wednesday they closed at NOK68.35, up from NOK26 a year ago.

Company Web site: http://www.dnbnor.com

-By Anna Molin and Dominic Chopping, Dow Jones Newswires; +46-8-5451-3093 or +46-8-5451-3091;; dominic.chopping@dowjones.com or anna.molin@dowjones.com