Companies urged to issue shares to refinance
UK finance directors are increasingly advising their companies to issue shares as a way of raising capital because debt-rating agencies are using tougher guidelines following the collapse of Enron.
As the agencies become stricter companies with large debts face being downgraded and struggle to borrow or find their bonds losing value, leaving finance directors with few options but to issue more shares to raise cash.
Last week, researchers at investment bank Goldman Sachs said the debt rating agencies are actively reviewing their corporate rating procedures.
Chemicals giant ICI last week issued £800m of new shares at a 45% discount to alleviate its £3bn debt. Evidence suggests other UK companies whose balance sheets need repairing will attempt to reduce debts by raising capital in the same way.