Pendragon underwriters at risk as share price halves

City underwriters earned their money today after virtually a third of car dealer Pendragon's £75.2million rights issue was left on their books.

The rights issue, which was part of a three-pronged financial restructuring led by chief executive Trevor Finn, could leave its underwriters as early victims of the stock market rout of the past few weeks.

When Pendragon announced the nine-for-eight issue of new shares at 10p a share in mid-July, its share price stood at 21.8p. But in the month since its share price has more than halved. Today they were trading at 10.4p as the underwriters scrambled to place some 243 million unsold shares in the market. Existing shareholders took up 67.7% of the issue.

The underwriters - RBS Hoare Govett, BarCap and Arden Partners - were paid fees of 2.5% or almost £2 million to cover the issue. That ensures that Pendragon receives the full proceeds, whether or not they place the unsold shares.