Paint and chemicals giant ICI has announced plans to issue more shares in order to pay off part of its £2.9bn debt mountain.

IC also plans to cut debt by selling its chemical catalyst subsidiary Synetix.

News of the rights issue, valued at around £800m, pushed the company's stock price down by 8.6% to 339p in mid-afternoon trade.

However, its bond price edged slightly higher as traders took the view that holding ICI debt has become more attractive.

"It's the right thing to do, but it's expensive for shareholders," said Peter Cartwright, chemicals analyst at Williams De Broe.

Analysts believe the company should be able to cut its debt to about £2.1bn by the end of the year.

ICI, which supplies materials to the automotive and electronics industries, has been hit hard by the global economic downturn.

In November last year, the company said it planned to cut 1,000 jobs.