STRUCTURAL steel business Severfield-Rowen Plc is hoping to raise £47.9 million through issuing new shares to its shareholders to help reduce its debt.

The company, based at Dalton, near Thirsk, said it had renegotiated its £35 million of debt with its lenders, subject to the rights issue being successful.

John Dodds, executive chairman, said: "Today's rights issue puts Severfield-Rowen on to a sound financial footing. The events that led to the rights issue related to an unacceptable level of performance on a small number of contracts.

"Positive action is in hand to address these issues and improve performance. It is extremely encouraging that our shareholders, our lenders and our clients have shown strong support for the business, endorsing the group's market leadership, longevity and underlying potential.

"With the balance sheet strengthened, we are confident that the group will move forward from here to achieve its long term growth objectives, both in the UK and India."

The group announced today its second interim results for the year ended December 31, reflecting the impact of contract overruns particularly the 122 Leadenhall Street contract, including a pre-tax loss of £23.3 million.

The new ordinary shares to be issued will represent about 70 per cent of the enlarged share capital following the rights issue, which is subject to approval by the company's shareholders at a general meeting expected to be held on March 18.

Mr Dodds described the results as "disappointing". He said the re-organisation of the group's largest businesses into Severfield-Watson Structures Ltd was expected to be largely complete by June, with more than half the £2 million anticipated overhead savings already made.

He said the company's order book at December 31 remained strong at £209 million, with £29 million of orders also secured by its Indian joint venture.

Following the reorganisation, Mr Dodds said he expected to return operating margins to between five per cent and six per cent over time and was confident that the longer term fundamentals of the group remained strong.