$375m demerger sweetener for CSR

The capital raising will be used to reduce debt from the current level of $1236 million to $900 million.

If the demerger goes ahead, $600 million of the debt will remain with the main CSR company and $300 million will be spun off with the sugar and energy division.

"Our board was not going to launch into the demerger process unless we were satisfied that we had the correct balance sheets for both the daughter companies," CSR chief executive Jerry Maycock said yesterday.

The fully underwritten capital raising, offering seven new shares for each 40 that investors own, at $1.66 each, will reduce debt levels that ballooned with the investment of $1 billion in the glass business in 2007 at the top of the market.

CSR shares, which were placed in a trading halt yesterday morning, last traded at $1.985.

Write-downs of the Viridian business continued yesterday, with $250 million slashed from the division's value thanks to the fall-off in building activity and a strengthening Australian dollar.

CSR booked a $280 million write-down against the business in May, meaning that more than half the value has now been wiped from this division.

In a note to clients on Friday, Citi analyst Julian Bu, said that with the dollar up 40 to 50 per cent since March, imports were gaining market share while overcapacity continued to be an issue facing CSR.

"At this point, we know there's overcapacity in Australia and in Asia. This seems to guarantee that pricing will be low, and profitability, if any, will be bad."

The write-down marred CSR's first-half results yesterday, with the company reporting a bottom-line loss of $155.6 million.

Excluding the write-down, earnings before significant items increased by 35 per cent to $96.6 million. CSR said guidance for a slight lift in earnings for the year remained on track.

Sugar was the standout performer, with earnings before interest and tax more than tripling to $114.2 million.

With sugar prices now at their highest levels since the 1970s, "now's the time to be spinning the business off", said Hugh Dive, from Investors Mutual.

In a further attempt to shore up the sugar business ahead of the demerger, CSR has agreed to acquire Mackay Sugar's 25 per cent stake in the joint venture Sugar Refining business in return for an 8.77 per cent interest in the demerged sugar business valued at about $100 million.

CSR yesterday declared a fully franked interim dividend of 2.5? a share. The dividend is payable on December 23. The record date for the share offer is October 29.