The highly indebted ABB engineering group has given itself some financial breathing space with plans to raise as much as SFr1 billion ($700,000).
The Swiss-Swedish group said on Thursday that it was going to sell convertible bonds, taking advantage of current low interest rates.
Such financial instruments earn interest for investors even when the stock is trading down. When the stock price rises, the value of the bond increases.
The news sent the share price surging by more than 11 per cent to SFr8.10 in early afternoon trading at the stock exchange.
“The worst is over for ABB. Confidence in management is returning,” commented analyst Claude Zehnder of Zurich cantonal bank.
“They needed the money and this is a good step,” he added.
Shares in ABB have almost doubled over the past month after courts in the United States approved its $1.2 billion asbestos settlement.
The deal is also a key factor for the proposed sale of its oil, gas and petrochemicals division, considered vital to reduce ABB’s debt mountain of $8.3 billion.
The fresh cash will be mainly used to repay $750 million in debt due at the end of the year, part of a $1.5 billion rescue package by its banks when other financing was exhausted last year.
ABB, which was punished for a major acquisition spree that left it amassing debt, has signalled that further equity or debt issues were possible in the future and said it was “constantly evaluating” its options.
The group, which employed over 200,000 at its peak, has been divesting units and slashing jobs to slim down to about half of its former size. It now focuses on power and automation technologies.
It is aiming to return to the black this year after posting a net loss of $787 million in 2002.
ABB has aroused investor interest of late because it expects to benefit from an anticipated spending spree in the US power sector after the electricity blackout earlier this month.
swissinfo with agencies
ABB is testing the market with the launch of a convertible bond.
The heavily indebted group plans to raise as much as SFr1 billion.
It is considering further equity or debt issues.
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