Invensys is today expected to announce a comprehensive refinancing of its £1.6bn debt pile, with a £500m issue of new equity, a high-yield bond and a new loan facility.
It is believed that the engineering group will tell shareholders these measures will prevent a fire-sale of company assets. Invensys needs to make a £515m debt repayment this summer and its disposal programme is unlikely to provide the money in time.
Strong rumours of a rights issue have been circulating in the City for more than two weeks, boosting the company's share price. Zafar Khan, an analyst at SG Securities, said: "Invensys have very effectively flown a kite and had a positive response from the market."
It is thought that the rights issue, which could be done on a one-for-one basis, may be accompanied by an open offer. The surprise now is that the company seems poised for a more major financial restructuring, with a bond issue and new bank loan lined up as part of the fundraising package.
Deutsche Bank was said to be working on all three tranches of the financing. The bank took a similar role in Swiss engineer ABB's debt equity loan financing package last year. Other banks and the company's broker, Cazenove, are also thought to be involved. Deutsche Bank and Invensys declined to comment.
On Tuesday, in response to its share price movement in recent days, Invensys admitted it was looking at raising funds. "We continue to explore a range of alternative financing routes in the banking and capital markets, while continuing to pursue a range of disposals," it said in a statement.
Invensys has total cash liabilities of £1.8bn, according to Dresdner Kleinwort Wasserstein, plus non-cash liabilities of £500m. Invensys announced a £1.8bn disposal programme in April last year but the only significant divestment has been metering systems, which was sold for £390m, far less than City expectations.
There are six business on the block, including three large divisions: climate controls, power-ware and appliance controls. It is widely thought that progress on these sales has been slow, as potential buyers exploited the financial pressure Invensys was under, forcing the company to go to the capital markets for the money instead. Mr Khan said: "They are saying to investors, 'bail us out so we can sell your assets at better prices'. It's really a timing difficulty."Reuse content