Shares in Marconi have lost another 38% of their value amid fears that shareholders will be left with nothing following a financial restructuring

Newspaper reports have suggested that Marconi will this week sign a deal with its creditors to reorganise the company's crippling �4bn debt.

However, there are fears that the deal will reduce the value of investors' interests to almost nothing and this has prompted rapid selling.

Shares in Marconi - once a star among telecoms stocks - slumped to 1.56p on Monday morning.

The shares hit a peak of 1240p in September 2000 but have plummeted in the last year, as the technology bubble burst and the group was left with large debts from its rapid expansion in the late 1990s.

Preparing for the worst

Marconi has raised �1.4bn in the last year by selling assets, but that is still not enough to pay back banks which are owed �2bn.

It warned in June that it was negotiating a survival package with banks and bondholders, but said this would lead to a "very substantial dilution in value for existing equity holders".

Newspaper reports this weekend suggested that Marconi will be forced to give its creditors all but 1% of the company, while the Sunday Telegraph predicted it would go into "voluntary liquidation".

The reports suggest that the deal will mean banks and bondholders receiving shares in Marconi in exchange for cancelling debts owed to them.

This so-called "debt for equity" rescue plan will leave private shareholders with only a token holding in a new subsidiary company.

Background of gloom

News of the imminent refinancing came less than a month after Marconi reported a sharp drop in sales for the first quarter and admitted its debts had increased by �152 million because of the cost of the restructuring.

First quarter sales in the US fell 39% in the first three months of its financial year, although the company said its core businesses in the UK and Italy had "stabilised".

City sources say Marconi turned down the chance to extend its borrowing until 2005 in return for higher interest rates last Autumn.

Now, it has little option but to cede control of the company.

Marconi has 7,000 employees in the UK, and manufacturing operations in 16 countries.