UTV, the owner of TalkSPORT and Ulster Television, has announced a surprise £50 million rights issue to avoid paying interest rates of more than 7 per cent on the debts it racked up buying a string of radio stations.

The decision sent the shares plunging 20 per cent to 169p but meant that the broadcaster will be able to borrow at a lower rate on its remaining £100 million of debt.

John McCann, chief executive, said: “We were due to refinance our debt at the tail end of summer, but it was clear that the market is getting tighter - see what's happening with mortgages - and so we decided to go forward and refinance now.”

Mr McCann admitted that the perception in the public market about highly geared companies had changed. “Even though we were still comfortable with our debt levels, the market had changed its mind. What was seen as acceptable a year ago is not today,” he said.

His decision adds to the pressure on Yell, the debt-laden directories group, which has refused to opt for a rights issue despite high levels of borrowings. Last month Johnston Press, the regional newspaper publisher, with a similar debt to profit ratio as UTV, opted for a £212 million fundraising.

UTV investors will be given the chance to buy two shares for every three they hold at a cut price of 130p. The issue will raise £46.7 million for the company, after the brokers Numis and Goodbody Stockbrokers take £3.2 million in fees for fully underwriting the cash call.

Mr McCann said that he had ruled out talking to a strategic investor, saying that he believed that “all investors should have a chance to participate”.

He added that there had been no talks with Doughty Hanson, the venture capitalist that owns TV3, the Dublin-based commercial broadcaster that has often been linked to its northern neighbour.

Cutting debt also acts as a hedge against a further downturn in advertising in both television, where the company owns the Northern Irish ITV franchise, and in radio. Mr McCann said that he was “not complacent” about the possibility, although at this stage he said that trading was in line with a statement issued last month.

UTV reported like-for-like revenue growth in the first four months of the year up 4 per cent, with strong radio growth in both Britain and across Ireland offsetting a 3 per cent decline in televison advertising.

However, if the economic environment in both countries were to deteriorate further, growth could reverse in the second half of the year.

UTV said that it would pay an interest rate of 6.7 per cent on the new borrowings it will take out in an agreement that extends until 2013.

However, had it avoided the rights issue, it believes that it would have had to pay about 7.6 per cent on the larger borrowings, which would have amounted to approximately 4.5 times underlying profits.

Paul O'Brien, finance director, estimated that the total saving amounted to about £1.5 million a year once both the reduced level of borrowings and interest rates were taken into consideration. The total level of debt to underlying earnings will be reduced to between three and four times.

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