UPDATE 2-Nippon Yusen plans $1.6 bln share sale after loss

* Money to be used for ships, restructuring

* Issues to boost outstanding shares by 37 pct

* Underwriters include Nomura, Mitsubishi UFJ, Merrill

* Shares down 4 pct vs Nikkei's 0.7 pct fall (Adds details, analyst comment)

By Yuko Inoue

TOKYO, Nov 12 (Reuters) - Nippon Yusen KK (9101.T), Japan's biggest shipping company, said on Thursday it would raise up to $1.6 billion through a public share offering to shore up its capital base as it hastens reforms to cope with a global shipping slump.

The severe economic downturn that has reduced global trade volumes pushed Japan's all of top three shipping companies into first-half losses, forcing them to scale back their fleets and review their growth strategy.

Nippon Yusen in particular has been hit hard by bulging losses in the air cargo business. Its debt ballooned to more than double its equity by the end of September, sharply above such ratios for domestic rivals Mitsui OSK Lines Ltd (9104.T) and Kawasaki Kisen Kaisha Ltd (9107.T).

"Nippon Yusen needed to strengthen a capital base weakened by the air cargo business, which is seen having a huge negative net worth," said Osuke Itazaki, an analyst at Credit Suisse.