Yue Xiu Enterprises (Holdings) has decided against subscribing to the six-for-five rights issue Denway Investment launched to raise $530 million for debt reduction. The move will leave Yue Xiu as the second-largest shareholder in red-chip Denway. Yue Xiu spokesman Sofia Yan Yuk-fung rejected suggestions the move was aimed at relieving the firm - controlled by Guangzhou municipal government - from funding pressure brought by Denway's investments in the mainland car industry. Yue Xiu believed Guangzhou Automobile Group, which had expertise in car-manufacturing, should become the largest Denway shareholder. Ms Yan said the decisions were all made in accordance with commercial principles. Yue Xiu became the largest Denway shareholder last year, increasing its stake from 18 per cent to 37 per cent as part of the Guangzhou government plan to restructure the then loss-making firm with interest in the failed joint venture Guangzhou Peugeot Automobile. The issue will dilute Yue Xiu's stake to 18.3 per cent. Yue Xiu vice-chairman Guo Peinan said the dilution did not reflect a lack of confidence in Denway, which had passed its most difficult period and had a bright prospects following its partnership with Honda Motor. Denway said it would issue at least 1.14 billion new shares at 46.5 cents each - a 10.6 per cent discount to the 52 cent price when trading was suspended on Wednesday. The rights issue was conditionally underwritten by a wholly owned firm of Guangzhou Automobile, China Lounge Investments, which has 32.3 per cent of Denway. Its stake would become 48 to 63 per cent after the issue.