GKN goes cap in hand to shareholders to cut debt

Subscribing shareholders will be given six new shares for every five they own.

The company will raise £403 million after it has given away £20 million in fees to its City advisers who are underwriting the fund raising.

The rights issue has been priced at 50p a share, 69p cheaper than the close in GKN's shares last night.

The immediate funding issue for GKN is a £350million overdraft facility which is up for renegotiation next year and which GKN's lending banks were playing hardball over.

"The terms being asked by the banks on the credit facility were extremely onerous," said a GKN spokesman. "The cost of refinancing the facility, the additional covenants that were being asked for and the timescale that was being enforced was not in shareholders' interests."

But it is the deep slump in its core global automotive and aerospace industries for which it makes parts - not least for the world's two newest but also troubled intercontinental jetliners, the Airbus A380 and Boeing 787 Dreamliner - which is hurting the company.

Chief executive Sir Kevin Smith admitted sales are down 10% this year even after a swing in currency translation. "The global recession has had a significant impact on both our business and credit market conditions," he said.

Much of the £20 million fees will go to JP Morgan, UBS, Gleacher Shacklock and co-underwriters HSBC and Royal Bank of Scotland.