UPDATE 3-Debt-laden Oerlikon seeks to defer loan payments

* Suggests also deferring payment on credit facility

* Proposal includes converting debt into Oerlikon equity

* Says no plans for major disposals

* Analyst says does not solve debt problem, only defers

* Shares plummet 22 pct

(Adds updated shares, analyst and investor comment)

By Sam Cage and Oliver Hirt

ZURICH, Dec 8 (Reuters) - A plan by Swiss engineering group Oerlikon OERL.VX to delay debt payments and restructure its finances got a thumbs down from the market on Tuesday, knocking more than a fifth off its share price.

Oerlikon said it wanted to defer payments on a loan and revolving credit facility, and suggested to its syndicate banks a reduction in interest charges and conversion of parts of its bank debt to an equity stake in the company. It also said it planned a capital increase.

"It's just pushed out the problem for three months. It's not a solution, just a deferral of a problem," said Michael Foeth, analyst at bank Vontobel. "We don't know whether the banks will agree."

The group makes a range of products from coatings used in Formula One racing cars to machines used to make solar cells, and has been hit hard by the sharpest economic downturn in decades.

Its shares plummeted after the news and were down 22.3 percent at 44.30 Swiss francs at 1552 GMT, compared with a 1 percent drop in the Swiss mid-cap index .SMIM. Renova, the investment vehicle of Russian billionaire Viktor Vekselberg, which holds a controlling stake of 45 percent of shares in Oerlikon, said it supported the plans and intended to participate in a capital increase and act as an underwriter.

Victory, a second major investor, which holds a 14-15 percent stake, said it could well take part in any capital raising, providing conditions were right.

Oerlikon had aimed to sell business units to raise cash to alleviate the debt it took on to pay for the acquisition of textile machinery and car parts maker Saurer in 2006, but a spokesman said on Tuesday it now did not plan major disposals.

It has launched several cost-cutting rounds and issued a series of disappointing figures this year, prompting Vekselberg to force out CEO Uwe Krueger and replace him with turnaround expert Hans Ziegler.

Oerlikon expects final details of its refinancing to be completed in cooperation with its banks by the end of February and sees the equity increase following in the first half of 2010. (Additional reporting by Catherine Bosley, editing by Will Waterman)