Rio wraps up rights issue, Australia demand strong

On Thursday, UK shareholders had taken up 96.97 percent of the deeply discounted, fully underwitten $15.2 billion rights offer, the fifth-biggest on record, putting the indebted Anglo-Australian group on a firmer financial footing.

The issue also marks a bonanza for the banks that underwrote it: Credit Suisse, J.P. Morgan Cazenove, Macquarie, Deutsche Bank, Morgan Stanley, RBS and Societe Generale.

The underwriters of the two legs of the rights issue were paid a 2.75 percent fee, or around $420 million in total, and are now also making a substantial extra profit by selling the small portion of shares that were not taken up by existing investors.

In the UK, banks sold the "rump" on Thursday at 21 pounds, a 50 percent profit on the London rights-issue price. The stock closed in London on Thursday at 20.35 pounds.

In Australia, banks will be looking on Friday to offload about 7.87 million shares, worth about A$407 million ($324 million) at Thursday's closing Australian share price of A$51.75.

Rio Tinto's Australian shares have been halted from trade pending the sale of the rump Australian stock.

Rio needed to raise the money to cut a $38 billion debt mountain it accumulated when it bought Canadian aluminium group Alcan at the top of the commodities market in 2007, an acquisition that opened one of the 136-year-old firm's darkest chapters.

Rio Tinto fell prey to an aborted takeover bid by rival BHP Billiton then briefly fell into the arms of its major shareholder, Chinese state-owned aluminium group Chinalco, before finally calling off the $19.5 billion Chinalco deal.

In the end, encouraged by a share-market rally and its investment banks, Rio Tinto opted for the rights issue and a cost-cutting iron ore joint venture with BHP Billiton.

But analysts said the mining giant still needs to sell non-core assets to pay down the $38 billion debt it took on to buy Canadian aluminium maker Alcan in 2007. ($1=1.258 Australian Dollar) (Reporting by Mark Bendeich and Denny Thomas; Editing by James Thornhill)