Invensys takes open route to refinancing

Engineering conglomerate Invensys is expected to announce its long-awaited rescue refinancing this week, which will include a £500m cash call on investors and a restructuring of its existing £1.6bn debt.

Structured as an open offer rather than a traditional rights issue, the fundraising will allow chief executive Rick Haythornthwaite the chance to strengthen the company's balance sheet ahead of a debt repayment milestone in June.

Invensys, formed by the merger of BTR and Siebe, span out of control during the dotcom boom. It signalled a need for a cash call in November when it warned that if the company failed to generate enough money to meet its existing debt repayment schedule from its ongoing disposal programme "the group would require additional sources of working capital".

Just under a year ago it set out a plan to raise £1.8bn from asset sales to cut borrowings and help fill a hole in its pension fund running at close to £1bn at the time.

While Invensys managed to offload its problematic Baan software company last summer for £83m, further progress has been slow, with the sale of its metering business for £390m in the autumn the only material disposal to date. The group's appliance control and windpower divisions remain up for sale, as does its uninterruptible power supply business.

A £400m debt repayment is due in June, with two further significant payments next year.

Speculation over the timing and pricing of a possible rights issue has produced sharp moves in Invensys's share price over recent weeks. After the 380p the shares reached at the height of the boom, they were trading at 22p on Friday.

Dealers assume the pricing of the open offer will be pitched at close to the market price rather than as a deeply discounted rights issue - emulating the approach recently taken by steel group Corus as it put together its refinancing.

Operations to repair the balance sheets of big, well established companies generally have been well received by the stock market. The broker Cazenove and investment bank Morgan Stanley are organising the Invensys deal.

Last May Mr Haythornthwaite warned that it would take two years to turn the group around, but in November he claimed the job could be finished sooner.

"As the financial noise begins to subside one can see the strength of industrial technology within the company," he said at the time. "We're getting away from the maelstrom of innuendo but it's not yet gone completely."

The company has been helped by the general market revival, which has shrunk its pension fund deficit to about £700m.