UPDATE 2-Banks throw Vestas a $1.2 bln credit line
* Vestas agrees loan facility with banks
* Says facility eliminates need for equity issue
* Says in position to reduce debt in future
* Shares jump 17.5 pct (Adds details, background, CFO, analyst comments, updates share price)
COPENHAGEN, Nov 26 (Reuters) - Danish wind turbine maker Vestas has agreed a 900- million-euro ($1.2 billion) loan with its banks, ending speculation it might need to issue shares and winning it more time to adjust to plunging demand.
The wind power sector is struggling with overcapacity, a faltering global economy and a reduction in subsidies for renewable energy by cash-strapped governments.
Earlier this month, Vestas reported its lowest third-quarter order inflow in at least five years. It has also warned 2013 will be tougher than this year.
"A potential share issue will not be demanded by the banks now and that is an absolute positive," said Alm Brand analyst Michael Jorgensen in response to the loan facility agreement.
"The question is still how clients will react to a highly geared Vestas," he added, noting they might have concerns about dealing with an indebted company as wind turbine deals often run for about 20 years.
At 1305 GMT Vestas shares, which have plunged around 95 percent in value from their highs of 2008, were up 17.5 percent at 30.62 Danish crowns.
Vestas, battling to restore investor confidence after profit warnings in October 2011 and January 2012, said the deal with its nine international banks showed their support for its business model and confidence it could cut debt in future.
"The agreement brings calm for us, for the banks, for shareholders and also for the big clients. That is what is important for us," said chief financial officer Dag Andresen.
"It also means calm while we adjust to a lower order intake in 2013," Andresen said.
A LONG WAY TO GO
Vestas has been slashing jobs and pulling out of unprofitable projects to cope with tougher market conditions.
Some analysts said there was still a long way to go.
"They have fewer (loan) facilities available than at the start of the year, so I don't think this is saving the company," said Sydbank analyst Jacob Pedersen.
"But seen in the light that the banks could have pulled the rug away from under the feet of Vestas, or forced it to raise capital, this is of course positive news," he added.
Last month, Spanish wind turbine maker Gamesa unveiled plans to cut 20 percent of global staff and slash output as part of a drive to break even in 2013.
Vestas has been the subject of takeover speculation for months as it became clear it needed funding. It said in August it was in talks with Japan's Mitsubishi Heavy Industries about some kind of cooperation.
Andresen declined on Monday to give an update on how those talks were progressing.
The lending facility consisted of a 250 million euros amortising term loan and a 650 million euros revolving credit facility, Vestas said.
($1 = 0.7717 euros) (Additional reporting by Shida Chayesteh and Kristian Mortensen; Editing by Hans-Juergen Peters and Mark Potter)