SocGen tries to plug capital gap

PARIS, France (CNN) -- Societe Generale on Monday launched a heavily discounted €5.5 billion (around $8 billion) rights issue as it attempts to fill a capital gap the French bank says was caused by trader Jerome Kerviel, while also lifting its net profit forecast for 2007.

The bank said net profit for 2007 is expected to be €947 million ($1.37 billion), although the figure is subject to a continued investigation into activities at SocGen investment bank and may be revised again, according to The Associated Press.

The rights issue came as the bank works to address fallout from Kerviel's massive unauthorized bets on European futures markets.

Societe Generale announced trading losses last month of more than $7.2 billion, which it attributed to fraud by Kerviel.

The bank said in January that the trading loss would wipe out the bulk of its earnings for last year.

A Paris court on Friday decided that Kerviel should be kept in prison while the investigation into the trading scandal goes on.

Kerviel, who traded European index futures, faces charges of abuse of confidence and illegal use of computers for his role in the scandal. He has not been charged with fraud.

France's second largest bank, Societe Generale said it will offer the rights issue shares at €47.50 ($68.94).

Existing shareholders will get the first chance to buy the shares, The Associated Press reported.

The offering price for shareholders is almost 40 percent below the bank's Friday closing share price of €77.72 ($112.80), the agency reported.

Shareholders will be able to buy one new share for each four shares held, it added.

Bank officials and the Paris prosecutor have previously said they believe Kerviel acted alone, though prosecutors have interviewed others, including mid-level managers, as part of their probe.

On Friday, French authorities announced they have a second trader in custody in connection with the case.

The trader is an employee from Fimat, a subsidiary of Societe Generale, the prosecutor's office told CNN. E-mail to a friend

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