Shareholders in the troubled Swiss reinsurer Converium have approved a key SFr533 million ($420 million) capital increase which the company says it needs to stay in business.
They also voted in favour of reducing the nominal value of the share price from SFr10 to SFr5.
Converium had asked shareholders to approve the steps at a special meeting in Zurich.
Earlier on Tuesday the reinsurer announced that banks had underwritten the deal at a steep discount.
But the company's share price lost further ground, falling by 13 per cent on Tuesday to SFr17, down from Monday's close of SFr19.55.
Analyst René Locher of Kepler Equities said the support from the banks would “definitely help Converium” to win the backing of its shareholders for the restructuring proposal.
The announcement ends growing fears that financiers might turn their backs on the troubled firm, whose stock has lost two-thirds of its value in the space of a year.
Dirk Lohmann, the company's chief executive, said on Tuesday that the reinsurer would cut 200 jobs in Europe, Asia and Latin America over the next two years, and shed almost two-thirds of its 210-strong workforce in the United States.
In a separate statement on Monday, Converium ended rumours of a possible takeover or alliance, saying it intended to scale down operations but would remain independent.
The company said it would focus in future on Europe, Asia and Latin America, regions “where its franchise remains strong”.
Converium estimates that its North American business will shrink by at least $1 billion next year, following a decision not to take on any new customers.
Overall, the company predicts that total gross written premiums for 2005 will reach roughly half this year’s volume, but predicts that “profitable growth” will resume in 2006.
The latest announcements follow a decision by rating agency Standard & Poor’s to upgrade Converium’s rating from BBB to BBB+.
Rating agencies, such as Standard & Poor’s and Moody’s, assign ratings to the bonds and shares of individual companies, based on their assessment of risk and creditworthiness.
Generally speaking, the higher the rating, the lower the risk of default.
High ratings (A or above) are considered essential for reinsurance companies if they want to win new business – or maintain the backing of banks for moves such as a new share issue.
Reinsurers are seen as particularly vulnerable to a ratings drop because of the high-risk nature of their own business – they essentially provide insurance cover for insurance companies.
For example, reinsurance plays a critical, though behind-the-scenes, role in the financial management of natural disaster losses.
The Standard & Poor’s upgrading was conditional on approval of the capital increase plan at Tuesday’s shareholders’ meeting.
The new shares will be issued at a nominal value of just SFr5, or half the nominal value of existing shares.
The nominal value is independent of the market value, which is determined by supply and demand and investor confidence on any given day.
However, a company whose shares are traded for less than – or near to – their nominal value is a prime candidate for a takeover, on the grounds that it is worth less than the sum of its assets.
Converium shares have fallen from an annual high of SFr70, in the wake of a series of negative financial announcements and accusations of poor management.
swissinfo with agencies
Share holders of Converium have backed a a SFr533 million ($420 million) capital increase to try to save the company going out of business.
They also approved a reduction in the nominal value of the share price from SFr10 to SFr5.
The company earlier confirmed on Tuesday that banks would underwrite the capital increase.
Converium quashed rumours of a possible takeover, saying it intended to continue operating independently.
Converium ranks among the top ten professional reinsurers with $3.83 billion in net insurance premiums written in 2003.
It employs a staff of 850 people in 23 countries.
It made a net profit of $185 million in 2003.
Total assets at the end of 2003 were $14.355 billion.
The share price has fallen by more than 70 per cent over the past 12 months.