July 21 (Bloomberg) -- HBOS Plc, the U.K.'s biggest mortgage lender, said 92 percent of shareholders shunned its rights offering, leaving underwriters seeking buyers for 3.8 billion pounds ($7.6 billion) of shares.

Investors bought 124 million shares at 275 pence apiece, Edinburgh-based HBOS said today in a statement. Underwriters Morgan Stanley and Dresdner Kleinwort Ltd. will try to sell the remaining 1.38 billion shares until 4:30 p.m. tomorrow, HBOS said.

``The company has got its money but the underwriters have been left with a whole truckload of stock,'' said James Hamilton, a London-based analyst at Numis Securities Ltd. who has a ``buy'' rating on the stock.

The offer is the biggest failure this decade by a European company to find buyers for shares in a rights offering, according to data compiled by Bloomberg. HBOS is the third U.K. bank that struggled to find buyers for its stock: shareholders of Barclays Plc, the U.K.'s fourth-largest bank, bought less than a fifth of the stock offered in its 4.5 billion-pound fundraising last week. The flops may also deter investment banks from underwriting share sales for lenders trying to replenish capital in the future.

``The message is loud and clear: people still don't really want to buy banking stocks,'' Julian Chillingworth, chief investment officer at London-based Rathbone Brothers, said in a Bloomberg Television interview today. ``From an HBOS point of view, they have shored up their balance sheet and improved overall capital ratios. They have achieved what they set out to do,'' said Chillingworth, who helps manage $21 billion including HBOS stock.

HBOS Declines

HBOS declined 3.3 percent to 272.75 pence as of 8:50 a.m. in London trading. The underwriters can't sell the shares for less than the 275 pence offer price plus broking fees, HBOS said in the statement. They can abandon the sale at any time if they can't find buyers.

In the weeks before the rights offer was completed, Morgan Stanley and Dresdner paid investors to buy, or sub-underwrite, about half of the stock on sale, two people familiar with the situation said July 18. HBOS directors bought their allocated shares in the offer.

HBOS needed the 4 billion pound-sale after writing down a similar amount on credit-related investments. The bank also sought the money to weather a deteriorating economy and housing market in the U.K.

Bottom Line

``The bottom line for HBOS is that we've raised 4 billion- pounds of capital,'' said spokesman Shane O'Riordain. ``Banks need more capital in tougher times and we've got that capital.'' HBOS will be one of the strongest capitalized banks in Europe, he said.

Bradford & Bingley Plc concludes its 400 million-pound rights offering next month. The mortgage lender's shares closed at 52 pence on July 18, 5.5 percent below than its 55 pence offer price. About 95 percent of Royal Bank of Scotland Group Plc's investors bought shares in its 12 billion-pound rights offering last month.

To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.net

Last Updated: July 21, 2008 04:05 EDT