Rexam is going for a rights issue after plunge into red

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The firm launched a four-for-11 rights issue to raise £350.7 million — £334.3 million after fees and expenses — as it looks to reduce its £2.1 billion debt mountain and stop its credit rating being downgraded to "junk" status.

Rexam plans to issue 233.8 million new shares to investors at 150p each and its shares lost 1p to 275¼p today. It came as the firm, which makes 55 billion cans a year, reported losses of £30 million in the first six months of the year compared with profits of £141 million last time around.

Chief executive Leslie Van de Walle said there will be no interim dividend this year but indicated Rexam will pay a final dividend of 8p a share.

"It has become increasingly clear that the effect of the recession on Rexam's trading will be deeper and more prolonged than previously thought," he said.

"While trading in the first half was broadly in line with our expectations, we now see no upturn in current trading conditions through the rest of 2009 and as a result we are taking prompt action.

"We examined all options available to us and consider that the rights issue is the right one. It will significantly enhance the prospect of maintaining the group's current investment grade credit rating, which is important for maintaining shareholder value."

Rexam sales were up 15% to £2.5 billion due to favourable currency fluctuations.

It has embarked on a cost-cutting drive to save £75 million a year through plant closures and 1500 job losses. It also cut its capital expenditure for this year by £50 million to £200 million.