Fashion retailer Esprit Asia Holdings is to raise between HK$609 million and $616 million through a share placement and subscription to cut its debts. The fund-raising exercise is understood to have been prompted by the recent rise in interest rates, which has increased costs on debts of $1.31 billion. Analysts estimated the company's net debt to equity ratio would be lowered significantly to 100 per cent, from 250 per cent, once a goodwill write-off of $580 million had been taken into account. The debts arose from Esprit's $1.83 billion acquisition last year of chairman Michael Ying Lee-yuen's privately owned retail operations spanning Europe, Japan and the US. Controlling shareholder Worldwide Thousand (WT), majority owned by Mr Ying, yesterday agreed to sell 180.41 million shares, or 19.98 per cent of its issued share capital, to institutional investors at $3.50 a share. Esprit will then issue the same amount of new shares at the same price to the shareholder. A 'substantial portion' of the net proceeds would be used to reduce existing bank loans with the balance used to fund expansion of its retail network in Asia and Europe, the company said. The placement and subscription is priced at a 4.1 per cent discount to yesterday's close of $3.65. WT has the right to receive an interim dividend of 3.65 cents a share but will face charges related to the deal. If the new shares are issued before April 18, Esprit will be able to raise $616 million and WT will get $6.57 million in dividend income. If not, Esprit will receive net proceeds of $609 million. The share placement and subscription is expected to be completed by April 21. WT's stake in Esprit will be diluted to 59.29 per cent from 71.14 per cent. For the six months to June, or the second-half of the current fiscal year, Esprit Asia is expected to realise the contributions of the newly acquired operations. This would bring the enlarged group's full-year net income to $213 million, Esprit said earlier. An analyst said Esprit would be able to earn net income of more than $229 million as a result of the fund-raising exercise.