Nortel Networks moved to bolster its cash reserves yesterday by selling $1.3 billion (€1.37 billion) in shares and convertible securities, up from the $800 million offering initially planned by the networking company.

However, the concurrent offerings, aimed at helping the company outlast the prolonged downturn in telecom equipment spending, will dilute Nortel shares by at least 30 per cent.

The shares and convertible securities were issued at the end of a week during which the networking company's share price plunged.

Nortel, which has significant operations in Belfast and Galway, has been criticised for waiting too long to cover its funding and has had to now pay a much higher price by offering shares at a much lower price.

Observers, however, said the company's larger offering this week would at least reduce concern about the company's ability to survive the industry downturn, which is not now expected to ease until late 2003 or 2004.

Nortel has been among the hardest hit telecommunications equipment-makers because the most dramatic spending cuts by carriers have been in long-haul optical networking, the business most responsible for Nortel's success in the 1990s.

The Canadian company has $4.8 billion in debt, and UBS Warburg recently forecast that Nortel would need to raise at least $1.6 billion to remain properly funded through 2003. Nortel, which has slashed its workforce by half over the past year, lost more than $27 billion in 2001 and this year had its credit rating cut to junk status.

This week's offering was Nortel's second convertible securities issue in less than one year. The company raised $1.8 billion in convertible senior notes last August.

Shares in Nortel started the week at $2.21 and were batted down to $1.41 on Thursday by short sellers in anticipation of the pending offering. Nortel shares were up 11 per cent to $1.57 in New York yesterday.

The two offerings consist of 550 million common shares and 25,000 equity units, which are convertible to 422 million-507million common shares in August 2005. The offerings were priced at $28,571 per equity unit and $1.41 per common share. The price of the equity unit included $22,542.53 per pre-paid forward purchase contract.

The company said closings of the two offerings were scheduled for June 12th, 2002, and were not conditional on each other. Proceeds would go to general purposes. Credit Suisse First Boston (CSFB), JP Morgan and Salomon Smith Barney managed the convertible unit offering, while CSFB and RBC Capital Markets handled the common share issue.