Ericsson hit by doubt on rights issue

SHARES in troubled telecoms group Ericsson plunged to a nine-year low as doubts about its planned $3.25bn (£2.05bn) deeply-discounted rights issue plagued the market.

Its shares hit a low of 8.80 kronor on the Swedish bourse before a slight rally took them to 9.10 kronor, still off 5.2%.

International credit agency Standard & Poor's has already rated the company just a single notch above junk status even though the rights were being offered to investors at a 74% discount to the current share price, at 3.80 kronor.

Another agency, Moody's, aims to review Ericsson's paper next month and there is gossip that it may downgrade them to junk status.

The credit agency moves came despite the rights issue being fully underwritten by a group of leading shareholders and Swedish banks. The cash raised will be used to reduce debt.