(Reuters) - German steelmaker ThyssenKrupp (TKAG.DE) fell to a one-month low on Thursday after unveiling a plan to cut debt by selling almost 10 percent of its capital held as treasury shares, in a quick fix after the failed sale of civilian shipbuilding assets.
ThyssenKrupp, whose shares were down 5.3 percent at 32.90 euros by 1100 GMT, had said late on Wednesday it would sell 49.5 million shares, equivalent to all of the shares it has bought back since 2006, to reduce a debt pile swollen by spending on steel mills in Brazil and the United States.
"This looks to us more like bridge financing to bolster the next two years," UniCredit analyst Christian Obst said.
The indicated price range for the share sale was 32.95-33.95 euros, a person close to the placing said, below Wednesday's close at 34.75 euros. The transaction, an accelerated bookbuild, was expected to close on Thursday and would raise 1.66 billion euros ($2.4 billion) at the indicated mid-price of 33.45 euros.
ThyssenKrupp's plan to sell the loss-making mega-yacht and maintenance businesses of Blohm + Voss to Abu Dhabi MAR fell apart last week, prompting an increase in the cost of insuring the group against default and hampering a move to strengthen its balance sheet.
Thyssen's debt pile stands at 6.5 billion euros ($9.3 billion), having increased by 2.7 billion since September.
Germany's largest steelmaker has said it was in talks with other potential buyers for Blohm + Voss, but the restructuring of its marine division will inevitably suffer delays.
The debt reduction plan is part of an ambitious overhaul of the sprawling conglomerate under new chief executive Heinrich Hiesinger and driven in part by the need to re-establish or maintain an investment grade rating before roughly 2 billion euros of debt matures in 2012/13, and again the following year.
ThyssenKrupp, scarred by the 2008/09 global downturn that battered the steel industry, is rated BB+ by Standard & Poors, only just in junk territory, and is just over the investment grade threshold for both Moody's and Fitch.
"Given Fitch recently said it would deem the failed sale of the shipbuilding assets as marginally credit negative, we believe management might have felt (the need) to act before a potential downgrade," Berenberg Bank analysts said in a note.
The main cause of Thyssen's rising debt pile were ambitious plans to expand on the other side of the Atlantic, but higher raw material costs and rising inventory levels, due to the recovery in overall demand, have also lifted funding needs.
ThyssenKrupp unveiled plans in May for a major revamp that would hive off its stainless steel unit, Europe's largest producer, as part of a 10 billion euro divestment plan to help pay debt.
At the same time it has been trying to upgrade its remaining engineering business, with products ranging from elevators and escalators to manufacturing plant equipment.
The placement of treasury stock is being managed by Commerzbank, Deutsche Bank and HSBC Trinkaus and Burkhardt. ($1 = 0.689 euro)
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