By Maria Sheahan and Arno Schuetze
FRANKFURT (Reuters) - ThyssenKrupp (TKA.DE) announced plans late on Monday to sell 51.5 million new shares in a capital increase as it seeks to shore up funds depleted by a downturn in the global steel market and an ill-advised foray into the Americas.
ThyssenKrupp's finances have been deteriorating as Chief Executive Heinrich Hiesinger struggled to extricate the industrial conglomerate from its loss-making Steel Americas venture, comprised of a steel slab mill in Brazil and a U.S. finishing plant.
Its plan to produce cheap slabs in Brazil and ship them to the U.S. for conversion into products for carmakers fell apart when Brazil's currency rose, hiking labor and production costs, and demand for cars slowed.
On Friday, ThyssenKrupp announced it had struck a deal to sell only the U.S. plant in Calvert, Alabama - to ArcelorMittal (MT.AS) and Nippon Steel & Sumitomo Metal Corp <5401.T> - for $1.55 billion, the bottom end of an expected deal price, leaving its Brazilian problem unresolved.
ThyssenKrupp's shares dropped 8.5 percent to 17.635 euros on Monday, their biggest one-day fall in over two years, as the news left investors wondering how much it must still do to exit the Brazilian part of Steel Americas.
"It is good that ThyssenKrupp has done something, but I don't have a lot of faith in the development of the mill in Brazil," said Joerg Schneider, a fund manager at Union Investment, which owns shares in ThyssenKrupp.
Steel Americas has cost ThyssenKrupp almost 13 billion euros in investment and losses over six years.
Two people familiar with the capital increase plan told Reuters the shares would be placed at between 17.05 euros and 17.635 euros, a discount of up to 3.3 percent to Monday's closing price, raising up to 907 million euros ($1.23 billion).
Exane BNP Paribas estimated earlier that 730 million euros would be enough to lower ThyssenKrupp's gearing - the ratio of its net debt to equity - to less than 100 percent from the 200.6 percent level at the end of September.
The new shares are being placed with institutional investors in an accelerated bookbuilding led by Commerzbank (CBKG.DE) and J.P. Morgan (JPM.N), ThyssenKrupp said.
ThyssenKrupp's biggest shareholder the Krupp Foundation, with a 25.3 percent stake, declined to say whether it would participate.
Sweden-based fund Cevian, which is reportedly looking to raise its stake from just over 5 percent, said it would not rule out taking part in the capital increase.
ThyssenKrupp made a third straight annual loss in its financial year that ended in September, weighed down by Steel Americas, and recently had to ask banks to waive loan covenants to avoid losing a major credit line.
Adding to the pain, Thyssen also said on Friday it had been forced to take back an Italian steel plant and an alloy unit sold to Outokumpu (HEX:OUT1V) last year, after the Finnish steelmaker - trying to overhaul its own finances - returned them in exchange for cancelling a 1.25 billion euro loan that Thyssen gave it to finance a wider deal.
The businesses will require investment - analysts say the Terni plant is loss-making and needs to be restructured, while the alloy unit, while profitable, is declining. That will further drain ThyssenKrupp's finances, and selling the businesses will be tough given that Outokumpu failed to find a buyer.
Schneider said he thought CEO Hiesinger had underestimated the scale of the task he faced in fixing ThyssenKrupp.
Appointed in 2011, Hiesinger has been trying to change the company from a low-margin steel producer into a maker of higher-margin products such as elevators, submarines and factory components.
Amid a steady deterioration in the company's finances and a general downturn in the global steel market, he has also had to cope with a Federal Cartel Office investigation that found Thyssen guilty of fixing prices and dividing the rail-steel market, which makes rails, points and sleepers.
($1 = 0.7377 euros)
(Additional reporting by Alexander Huebner and Tom Kaeckenhoff; editing by David Holmes and Tom Pfeiffer)