Stricken 3i ditches divi and launches £700m fund-raiser

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The fund saw net asset value more than halve in the year to the end of March, down from £10.77 a share to £4.96 and blamed it on "the most rapid economic downturn in 3i's history, the dislocation of capital markets and the collapse of mergers and acquisitions activity".

Critics say the company badly misread the market and chief executive Philip Yea was ousted in January, to be replaced by Michael Queen.

The rights issue will see it raise £700million - after £32 million in fees has been gobbled up by bankers at JP Morgan Cazenove, Merrill Lynch and Rothschild.

Shareholders will be able to buy nine new shares for every seven they already own at 135p a share - a discount of 60%.

3i dropped out of the FTSE in March because of a slump in its share price. It is burdened by debts of £1.9billion, which Queen wants to cut in half over the next year.

3i's assets under management tumbled by £1.7 billion to £8 billion.

Queen said the rights issue, "will strengthen not only our balance sheet but also our market position".

All private equity houses are struggling as the global credit drought makes it harder to buy and sell companies. 3i has invested just £968 million in the year, down from £2.2 billion a year earlier. Its shares fell 5¼p to 333¾p this morning.

Taylor Wimpey, Britain's biggest housebuilder, was also forced into a rights issue.

The one-for-one share offer is priced at 25p each, a 48% discount and will raise £510 million to slash debt.

Chief executive Peter Redfern said he had "taken the difficult decisions necessary to protect the inherent value in the group".

He claims the group will now be "in a strong position to return to profitability" putting it "at the forefront of any housing recovery".