Oerlikon receives cash call backing

Oerlikon, the beleaguered Swiss engineering group controlled by Russian oligarch Viktor Vekselberg, said on Monday its main shareholder and bankers had agreed a SFr1bn ($939m) recapitalisation to restore the company to a more stable financial footing.

The deal, which still has to be approved by all of Oerlikon’s lenders, would see the group drastically write down its capital and launch a massively discounted SFr1bn rights issue. The group would also cut its borrowings and swap some debt into equity.

The transaction would allow the group, which has suffered from the global economic downturn and in particular from its overpriced 2006 acquisition of the Saurer textiles machinery-maker, to lower its debt by SFr750m-SFr1bn.

The main part of the plan involves a 19:1 rights issue, priced at SFr3.72 a share – a fraction of the group’s share price. Oerlikon’s stock rose marginally to close at SFr35.5 on Monday.

The rights issue would be taken up fully by Mr Vekselberg’s Renova holding company, which owns about 45 per cent of Oerlikon. Renova, which has suffered a severe loss on its stake since investing in 2006, would contribute SFr447m–SFr400m in cash and the rest via a conversion of debt.

The remaining SFr553m would be offered to other shareholders, and if not taken up would be underwritten fully by Oerlikon’s lenders under a debt for equity swap.

Depending on the outcome of the capital raising, certain unnamed lenders would be given the right to buy further shares, at SFr6 each, for up to 5 per cent of the group’s enlarged share capital.

The unnamed lenders would also be allowed to buy the 1.3m treasury shares currently held by Oerlikon, which amount to more than 9 per cent of the share capital, at market prices.

The banks would waive between SFr25m and SFr125m of debt, with the degree of forgiveness depending on the take-up of the rights issue. Creditor banks would forgive less debt the more equity they were obliged to purchase under the capital raising.

Under the terms, which could see Renova’s stake in Oerlikon fall to as low as 38 per cent, Mr Verkselberg has also agreed to reduce his boardroom representation to allow a more independent Oerlikon board.

Renova has three representatives on the five-member body, including the chairman.

Full approval of the plan remains dependent on the backing of all of the lenders, although Renova and Oerlikon’s main banks have supported the project.

Further details may be made available later this week when Oerlikon reports its 2009 results.