(Reuters) - Britain's largest energy supplier Centrica (L:CNA) said on Thursday it intended to raise funds equal to nearly 7 percent of its share capital, partly to cut debt, sending its shares down as much as 8 percent.
The company said the placing of roughly 350 million shares, would help it fund two acquisitions and pay down additional debt of about 400 million pounds.
At least two analysts said the amount being raised was larger than expected, and expressed surprise that the company was choosing a fundraising to cut debt.
Jefferies wrote in a note that raising equity was an expensive way of paying down debt.
Centrica said the credit metrics required for the current strong investment grade credit ratings were under pressure, especially as it looks to close the two deals.
"A 7 percent placing therefore allows... for lowering of net debt, reducing pressure on credit metrics and the group's targeted strong investment grade credit ratings, in what remains an uncertain environment," it said.
The capital raising probably meant that Centrica does not expect to complete its disposal of North American E&P assets this year, RBC Capital Markets analysts wrote in a client note.
Moody's placed Centrica's Baa1 credit rating on 'negative watch' in February.
The utility company had announced the 170-million-pound acquisition of Danish energy management company Neas Energy on April 21.
It said on Thursday that it expected to close a similar acquisition in the near term with an expected price tag of 150 million pounds.
Shares in the company were down 7.8 percent to 213 pence at 0828 GMT, making it the top loser on the FTSE blue chip index (FTSE).