Nov. 14 (Bloomberg) -- Conergy AG, Germany's second-largest solar company, is seeking to raise 399.3 million euros ($506.5 million) selling new shares to pay off loans that have sapped earnings this year.

The company will sell 363 million shares at 1.10 euros apiece, Hamburg-based Conergy said today in a statement. That would increase the number of outstanding shares more than 11-fold.

Conergy suffered shortfalls in components for solar and wind parks last year, entering a ``liquidity bottleneck'' that forced it to borrow 240 million euros from Commerzbank AG and Dresdner Kleinwort Group Ltd. The interest payments on these loans and consultants' fees for overhauling operations prompted the company to forecast a loss for 2008.

``With the capital increase we will strengthen our balance sheet and make a big step toward stable financing,'' Chief Executive Officer Dieter Ammer said today in a separate statement on the company's quarterly earnings.

In addition to resolving the bridging loan, the funds will go toward paying off syndicated financing and funding the overhaul, which includes cutting jobs and selling units. Conergy, which had aimed to be a renewable-energy conglomerate offering everything from windmills to heating pumps, decided to reduce assets and staff to focus on producing solar modules.

Asset Sales

Conergy had previously sought to raise 450 million euros to repay the loans, and scrapped that target after selling its ``cash-intensive'' wind-power operations to private-equity investor Warburg Pincus LLC, Ammer said by telephone today.

The stock sale, which will give the company a share capital of 398.1 million euros, is underwritten by Credit Suisse Group and Dresdner Bank AG, according to the statement. The subscription period will begin ``shortly,'' subject to approval from Germany's financial-markets regulator BaFin, Conergy said.

Existing stakeholders can buy the shares at a ratio of one to 10, with the exception of 12.1 million of the new shares, for which subscription rights have been excluded, the company said.

Conergy said today its third-quarter loss almost quadrupled under the burden of its loans. The company posted positive earnings before interest, tax, depreciation and amortization for a second straight quarter after starting the overhaul, according to the statement.

Germany's largest solar company is Q-Cells SE.

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

Last Updated: November 14, 2008 10:14 EST