Invensys tumbles on rights issue jitters

Fears took hold yesterday that Invensys, the debt-laden engineer, may struggle to find support for a potential rights issue to rebuild the company's balance sheet.

The company is facing a key debt repayment date this summer and is now understood to be considering a rights issue to raise as much as £500m to help clear its financial hurdles. John Nuttall, an analyst at Investec, said: "There is a risk that the Invensys operating businesses have been irreparably damaged and that the once strong brand equity has been eroded to such an extent that shareholders might choose not to support an additional fund raising."

Invensys shares fell 9 per cent to 20p, making it the worst perfomer in the FTSE 350. It was the most heavily traded UK stock, with more than 219 million shares changing hands, well above its average volume.

Invensys began selling off assets last summer to help raise funds and is now thought to have asked Morgan Stanley to look at the possibility of a rights issue. The company must repay £500m of its £1.6bn of debts in June and Invensys has already said it may have to raise additional funds, on top of the disposal programme.

Some in the City believe a rights issue could prove to be the boost the company needs, giving it more time to sell the divisions it has earmarked for disposal. It has so far made only £500m from asset sales of the £1.8bn it had planned to raise. Dresdner Kleinwort Wasserstein believes a rights issue would be an "extremely sensible move" for Invensys.