ICI forced into £800m cash call

CHEMICALS giant ICI was today forced to admit that it is about to make a massive £800m rights issue following falls in its share price and fears of a downgrade by international credit agencies.

The announcement sent its share price plunging 8%, the 32p fall to 339p knocking £200m off its market value. The cash call will spare ICI the embarassment of a credit rating downgrade which had been threatened by some agencies.

Since rumours began to circulate on the Stock Exchange a few days ago, £450m has been wiped off ICI's market value, now around £2.5bn.

The statement merely says the issue will be fully underwritten and that cash raised will be used to service debt of £2.9bn. It does not give details of the cash-raising as they have yet to be finalisedon Wednesday night and decided to announce the rights issue early. The original plan had been to issue a statement next Monday.

Insiders said leaks from ICI's financial advisers have infuriated board members, though none of them was prepared to comment.

The rights issue will be one of the largest ever by a major British company and is an indication of banks' caution in lending to industrial companies. Credit rating threats from international agencies led ICI's board to approach its financial advisers some days ago to draw up details of the rights.

ICI believes the issue will earn its bonds a stable 'investment grade' rating of BBB/Baa2. Such a credit rating would enable it to borrow at 'significantly better terms'.

ICI also said that its pre-tax profit for the year to 31 December, before exceptional items and goodwill amortisation, will be £401m, slightly ahead of analysts' forecasts. The company also plans to pay shareholders a second interim dividend of 9.75p, bringing the total for the year to 16p.

International trading in the fourth quarter was 'resilient' with full-year, like-for-like sales in the National Starch, Quest, Performance Specialties and Paints divisions 'in line with last year'.

The specialty chemicals group is selling its catalyst business Synetix for an undisclosed sum, the proceeds of which will also be used to reduce debt.