ICI to sell Synetix in bid to reduce debt mountain
11 Feb 2002
Once known as the bellwether of British industry, ICI is now preparing to sell off its catalysts business, Synetix, and is preparing a rights issue to raise £800million. The proceeds would go towards reducing the company's £2.9billion debt, which has led financial institutions to downgrade its bonds.
The company incurred the debt when it bought the specialities operations of Unilever in 1997 as part of its plans to move away from cyclical commodities into specialities. It has halved its debt since then, but the financial institutions remain concerned. If it does not reduce the debt, its credit rating will be downgraded, which will make it difficult for the company to refinance the debt at advantageous interest rates. A downgrade would add some £40million to its annual interest bill.
'ICI's Board believes that it is in the best interests of ICI and its shareholders to strengthen the balance sheet and improve the group's financial flexiblity,' the company said in a statement to the stock market.
The company's shares dropped sharply after rumours of the rights issue were leaked to the market, forcing the company to issue the statement.
The company says that its international businesses - National Starch, Quest, Performance Specialties and Paints - delivered 'resilient performances' and 2001 sales in line with the previous year. Moreover, it says, Synetix, which produces catalysts for petrochemicals, fine chemicals and pharmaceuticals, is 'a strong business in a consolidating industry.' The proceeds from the sale will be used directly to pay down the debt.
