Royal Capital opposes Natixis rights offering

NEW YORK (Reuters) - Asset manager Royal Capital Management said it opposes plans for a 3.7 billion euro ($5.4 billion) rights issue by French investment bank Natixis (CNAT.PA: Quote, Profile, Research, Stock Buzz) which could dilute existing stakes by upto 50 percent.

In a letter to Natixis Chief Executive Dominique Ferrero, Royal Capital said it supports an alternative capital-raising plan proposed by activist fund manager Greenlight Capital earlier this week.

Under that plan, Natixis would sell a portion of its cross-holdings in its two largest shareholders, Banques Populaires and Caisses d'Epargne.

Royal Capital said it would also support a smaller, 1.2 billion euro rights offering and a sale of 2.5 billion euros of Natixis' stock in its parents.

But selling 3.7 billion euros of shares in a rights offering when the shares trade at less than half their book value will unacceptably hurt minority shareholders, Royal Capital wrote.

The main shareholders have already underwritten the issue and will subscribe to their own 70 percent stake.

Natixis is set to publish its quarterly results on August 28 and it has called a shareholders meeting for the following day to approve the capital increase, which is needed to boost its solvency ratio after heavy writedowns due to the credit crisis.

Banques Populaires and Caisses d'Epargne have tried to help the bank by injecting some 2.5 billion euros of cash over the last year. This makes the shareholders vote a pure formality for the bank created by the merger of their Natexis and Ixis units.

(Reporting by Dan Wilchins; editing by John Wallace and David Cowell)