LONDON (Reuters) - Aberdeen Asset Management (L:ADN) will raise 100 million pounds ($155 million) by issuing preference shares to one of its existing investors, giving itself a bigger war chest to seed new funds as it fights outflows.
The shares will be issued to Japan's Mitsubishi UFJ Trust and Banking Corporation (MUTB), which has a stake of about 17 percent in the London-listed money manager.
The preference shares will count towards Aberdeen's Tier 1 Capital and will convert to ordinary shares should the company's Tier 1 capital ratio fall below 5.125 percent, giving the company another safety net to strengthen its capital base. The ratio was 13 percent at the end of March.
The shares will entitle MUFJ to receive a fixed dividend of 5 percent a year. The dividend will be non-cumulative and payable at Aberdeen's discretion.
"The ability to generate organic growth through the launch of new funds will be enhanced if the company is able to commit increased levels of seed capital so that the funds are launched at a level at which they will be considered credible," the asset manager said on Monday.
At 1212 GMT Aberdeen shares were down 2 percent, lagging a 1.1 percent weaker FTSE 100 index (FTSE).
Emerging markets-focused Aberdeen has been hit hard by heavy outflows recently, with investors bailing out because of the increasing likelihood of an interest rate rise in the United States.
RBC Capital Markets analyst Peter Lenardos said he was surprised by the move, given Aberdeen's stated goal of returning surplus capital to shareholders.
In May Aberdeen announced a share buyback programme of up to 100 million pounds, to be conducted over the rest of the year.
"While we view a conversion of the shares as unlikely, we believe today's announcement signals that Aberdeen is having organic growth issues and could be subject to increased regulatory capital requirements," Lenardos wrote in a note to clients.
Aberdeen, however, said it is well placed with regard to its capital buffers and remains committed to its share buyback plan.
"The purpose of the preference share issue is to enable the provision of increased seed capital without impacting the use of the group's existing resources," the company said in a separate statement to Reuters.
"The preference shares are an efficient form of capital that are recognised as an element of regulatory capital and, with a fixed coupon of 5 percent, the cost of capital is considerably lower than ordinary shares," it added.
($1 = 0.6437 pounds)