UBS Discounts $15 Billion Offering

Battered Swiss bank UBS(UBS Quote) on Thursday said it would raise $15.5 billion through a deeply discounted rights offering.

The Zurich-based bank will sell the new shares at 21 Swiss francs, a 31% markdown from the roughly current price of 30.64 Swiss francs. Shareholders will receive one subscription right per share held, with 20 of the rights entitling the holder to buy seven new shares at the price of 21 Swiss francs.

The issue has been fully underwritten by Goldman Sachs(GS Quote), JPMorgan Chase(JPM Quote), Morgan Stanley(MS Quote) and BNP Paribas. The rights will begin trading on May 27 on the SWX Europe and the New York Stock Exchange.

Just a few weeks ago, UBS reported staggering losses for the first quarter due to the U.S. mortgage market crisis and confirmed plans to reduce headcount. The bank has already received cash infusions from the government of Singapore's sovereign wealth fund and an undisclosed Middle Eastern investor.

UBS on Wednesday unloaded $15 billion in subprime and Alt-A mortgage assets to private equity firm BlackRock(BLK Quote). UBS' pain was Blackrock's gain as the value on the assets was $22 billion and Blackrock only had to put up $3.75 billion in equity, while UBS loaned the remaining $11.25 billion.

Goldman Sachs analyst Christoffer Malmer trimmed his price target after Thursday's rights offering to 34 Swiss francs from 35 Swiss francs.

Derek Chambers of Standard & Poor's lowered his rating to hold from buy earlier this month. "We believe its plan to cut costs and headcount outside the troubled parts of the investment bank could adversely affect franchise value," he wrote.