HELSINKI/FRANKFURT, Nov 30 (Reuters) – The world’s No. 1 stainless steel maker Outokumpu said it planned to raise 650 million euros through a rights issue and divest assets back to ThyssenKrupp in an unexpected package of steps aimed at shoring up its finances.
The move will partly reverse Finnish Outokumpu’s 2012 acquisition of Thyssenkrupp’s stainless steel business Inoxum as it transfers a large steel plant in Terni, Italy, and high-performance alloy unit VDM back to the German group.
Outokumpu has been hit hard by Europe’s economic slowdown and by overcapacity in the industry, pushing up its debt and leading to speculation that it may need more cash from its shareholders.
The assets will be transferred to ThyssenKrupp in exchange for the cancellation of a 1.25 billion euro ($1.7 billion) loan note that Thyssen granted to Outokumpu when their original deal was done in 2012.
“This outcome was totally unexpected. For Outokumpu it is a relief package, as the company’s financing risks come down significantly,” said Antti Viljakainen, analyst at Helsinki-based Inderes Equity Research.
The divestments will lower Outokumpu’s debt-to-equity ratio by about 30 percentage points from 132 percent at the end of October.
Outokumpu also announced other financing steps, saying it has secured a new 500 million euro loan facility from a group of its banks and is seeking to extend the maturities of its existing debt.
The 650 million euro share issue plan has received the support of owners representing most of its shares, it said, while the remaining part will be underwritten by Outokumpu’s core banks.
Chief executive Mika Seitovirta told a conference call he was happy the company can now concentrate on spurring growth, adding that he still believed the company could target annual savings of 200 million euro from the Inoxum deal.
“Now we can focus on continuing synergies and operational restructuring, and driving growth through the ramp-up of new investments,” he said.
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