The HBOS rights issue scheme, hoping to raise £4 billion, as failed miserable with a measly 8.29 percent of cheap shares on offer bought by existing investors.

In April HBOS, the owner of one of the UK’s largest mortgage lenders, announced plans to strengthen its financial position against the current backdrop of continuing financial market volatility and the challenging UK economic environment. To do this HBOS would give shareholders the chance to support a £4 billion cash call. Read more: HBOS £4 Billion Rights Issue

The scheme known as a rights issue is a procedure taken by companies to increase their capital. To raise money such companies will offer new shares to existing shareholders at a discounted price. For HBOS these meant shareholders could pick up 2 new shares priced at 275 p for every five shares they already owned.

However new reports claim that just 8.29 percent of the new shares on offer were invested in by existing shareholders- a disappointing and shocking turn out for HBOS.

The rights issue had its critics when the plans were first announced, with some analysts and shareholders claiming the cash call was unnecessary and didn’t make sense. News of such a low investment in shares on offer by the rights issue support these earlier claims, with figures revealing an even lower backing for the cash call than previously expected.

However HBOS are set to make their £4 billion target with the help of - Morgan Stanley and Dresdner. The two banks will have not choice but to buy the rest of the shares as a result of the position as underwriters in the deal. They will however have 2 days to find buyers of the new shares until they will have to take responsibility for the unwanted shares.

According BBC's business editor Robert Peston the phrase “doing an HBOS” is likely to become city slang for how not to raise money.