Rexam in £350 million cash call

Rexam, world's biggest drinks can maker, is considering fundraising options

The world's biggest drinks can maker has said it was mulling its fundraising options in a bid to avoid a 'junk' credit rating.

Rexam, which makes more than 50 billion cans a year for drinks such as Pepsi and Red Bull, said continued depressed markets meant the chances of it losing its investment grade status were now "unacceptably high".

The London-based firm said an issue of new shares in order to raise additional funds was being considered but that a final decision had not been taken.

The loss of investment grade status is significant for Rexam because it would affect the cost and the availability of future credit, resulting in a blow to profitability.

The Sunday Telegraph said Rexam will look to raise £350 million from a rights issue as the company moves to avoid another downgrade.

Earlier this year, rating agency Standard & Poor's lowered Rexam's long-term corporate credit and unsecured debt rating from BBB to BBB-, just one place above junk status.

Rexam's debt pile stands at £2.6 billion after it acquired Rostar, the Russian beverage can maker, in February last year and the figure was impacted by unfavourable currency exchange rates.

Despite the downgrade fears, Rexam is not in danger of breaching its debt covenants - the tests applied by lenders that, if breached, give them powers to demand a restructuring or the right to recall the debt.

Rexam also said half-year results, due to be published on Thursday, will be in line with market expectations.

But with no upturn in trading conditions the company's ability to generate significant cash to pay down debt next year has been reduced.