Shareholders give Ericsson $3.3bn

Ericsson CEO Kurt Hellstrom hopes for profits in 2003

STOCKHOLM, Sweden (CNN) -- Ericsson has shored up its finances by raising 30 billion Swedish crowns ($3.3 billion) from existing shareholders.

Now the world's biggest maker of wireless network equipment is dismissing concerns that many of its clients, who borrowed money from Ericsson to buy their gear, may not be able to meet repayments.

"We believe that the telecom market is a long-term growth market and with the rights offering we now have the confidence and security of a strengthened financial position,'' said Ericsson Chairman Michael Treschow on Friday.

The Swedish company plans to use the money to cut its debts, which have been cut to junk status by ratings agencies. The company was forced to raise money through a share sale as many of its debt-laden customers continue to slash new orders and capital spending.

It has already set aside about $701 million in case some of its telecom customers cannot afford to repay loans.

MORE STORIES • MMS phones: Don't believe the hype  • Ericsson posts hefty loss  • Nokia warns of slower growth  • Ericsson to slash 20,000 jobs

Ericsson sold its stock at 3.80 crowns per share, almost half the value of its closing price of 6.15 euros, on Thursday. The stock price has plunged more than 95 percent since peaking in March 2000.

The huge discount meant its underwriters -- Morgan Stanley, Enskilda Securities, Goldman Sachs, Handelsbanken, Schroders Salomon Smith Barney and SEB -- have not been left with huge amounts of unwanted stock.

Its two biggest shareholders, Investor AB and AB Industrivarden, as well as major institutional shareholders, had said they backed the issue when it was announced on July 19.

The rights issue succeeded despite heavy short selling of Ericsson stock by hedge funds. Stock fell to less than 5 crowns -- 10-year lows -- in the weeks before trading in the rights closed last week.

Ericsson has cut 42,000 jobs and joined forces with Japan's Sony to make mobile phones after posting its first annual loss in 2001. It says it will not return to the black until sometime in 2003.