Independent Shares Suspended Pending Rights Announcement

The London Stock Exchange halted trading in the shares of Britain’s Independent Insurance Group plc pending the announcement of a rights issue aimed at shoring up the troubled insurer’s capital base.

Independent has been in financial difficulty since last February when it announced a steep fall in expected profits. Its founder and CEO Michael Bright resigned, and now serves only in an advisory capacity. On Friday the company issued a preliminary announcement that it was considering issuing rights to purchase additional shares, and hoped to raise £150 million ($210 million) to strengthen its capitalization.

The value of the company’s shares fell 20 percent after the news became public, as it is anticipated that any rights offering would have to be deeply discounted in order to find any buyers.

Independent has been in negotiations with the Hong Kong and Shanghai Bank, and is expected to confirm the rights issue later this week, leading to the suspension of trading in its shares.

British analysts, however, have indicated that the company will also have to undertake a major management reorganization, as part of an overall effort to strengthen its capital position. Standard & Poor’s, which had already downgraded Independent’s ratings, warned last week that “failure to address the capital concerns may result in a further lowering of the company’s rating.”