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Finnish stainless steel maker Outokumpu said it planned to raise 650 million euros ($885 million) through a rights issue and divest assets back to ThyssenKrupp as it looks shore up its finances.

The move will partly reverse Outokumpu's 2012 acquisition of Thyssenkrupp's stainless steel business Inoxum as it transfers a large steel plant in Terni, Italy as well as high-performance alloy unit VDM back to the German group.

Outokumpu has been hit hard this the European slowdown and overcapacity in the industry, pushing up its debt-to-equity ratio to 132 percent at end-October and prompting speculation it may need more cash from shareholders.

Chief executive Mika Seitovirta said the assets would be ceded to ThyssenKrupp in exchange for a 1.25 billion euro ($1.7 billion) loan note that Thyssen had granted Outokumpu when the original deal was done in 2012.

"The announced divestures and capital measures will significantly strengthen our balance sheet and liquidity," Seitovirta said in a statement early on Saturday.

Outokumpu also said it had obtained commitments from banks for a new 500 million euro loan facility to shore up its finances.

It had received irrevocable commitments for the rights issue from shareholders representing 53 percent, with the remaining 47 percent of the 650 million euros being underwritten by its core banks.

It will also seek amendments to the terms of existing financing arrangements including extension of their maturities until 2017.

In addition, Thyssenkrupp will sell its 30 percent shareholding in Outokumpu. The Finnish state's investment arm Solidium is set to buy some of the shares, boosting its stake in the firm from 22 to around 30 percent.

The company, like other steelmakers in Europe, has faced weak demand as a result of customers holding back from purchases because of falling steel prices. Meanwhile, its Inoxum acquisition suffered a setback as authorities demanded the Terni mill to be sold as a condition for approval.