New York - Shares of Palm Inc. fell as much as 4.8 percent on Monday, as the tightening credit market fueled investor concerns about its previously announced plan to take on new debt as part of a private equity financing agreement, Reuters reported.

While analysts said Palm's plans to sell a 25 percent stake to Elevation Partners for $325 million would likely go ahead, they said investors were worried about extra costs from the deal, which also involves $400 million in new debt for Palm.

Palm shares were down 46 cents at $13.81 in afternoon trade on Nasdaq after Deutsche Bank analyst Jonathan Goldberg lowered his price target for the stock. Earlier they fell as low as $13.58.

"We believe the investment community is beginning to question the merits of this transaction in light of the new credit market," Goldberg said in a note to clients.

Goldberg, who also cited Palm's lagging core business and new competitive products, cut his price target for Palm shares to $13.50 from $14. He has a "sell" rating on the stock.

As part of the financing pact, Palm has promised to pay shareholders $9 a share in cash, using the proceeds along with existing cash and $400 million in new debt for the payout.

Goldberg said that while the plan would likely still go ahead, it was likely to result in higher costs.

"We think Palm could end up with a more costly debt structure than originally envisioned," Goldberg said.

Related Links

http://www.reuters.com/article/technologyNews/idUSN0641839620070806