Cookson cash-call is on the ropes

DEBT-LADEN Cookson's £290m rights issue was heading for collapse today after the share price dropped below the heavily-discounted offer price of 25p. The issue is not underwritten and analysts claimed the company may have to pull it.

As the shares continued their slide, losing 6 1/2p to 21 1/2p, one analyst said: 'These boys have got to be joking. It's not underwritten and as far as the market is concerned, that's it. It wasn't a clever idea in the first place.'

The eight new shares for five old shares offer, sponsored by Lazard, has Cazenove and Merrill Lynch as joint advisers. Priced at 25p, the shares were almost 50% below their market price of 49 1/2p when the rights issue was launched last Thursday.

Cookson, which has electronics, ceramics and precious metals businesses, has £750m of debt thanks to a £1bn spending spree - and servicing the debt is expensive. The group's interest bill in the first half rose from £4m to £29.5m.

But a Cookson spokesman said the group would press on with the issue, claiming it had strong support from investors. He added: 'Nobody would make any snap judgments on the back of one session's trading on a day of incredible volatility.'

Stephen Howard, who became chief executive in 1997, denied the move was a rescue package, last week saying: 'Things are tight but we aren't breaking any covenants. We don't have a problem paying our interest and no one is holiding a gun to our head.'

If the rights issue fails, investors will question the future of its management. Prior to today, Cookson said it had letters of support from investors holding 36% of its equity base, but they are free to change their mind. Cookson's major investors are Fidelity International, Morely Asset management, Franklin Resources, Aegon, Axa and Standard Life.