NEW YORK (CNN/Money) - Tyco stock surged Tuesday after the company said it uncovered nearly $400 million in accounting errors but no major fraud. But investors seemed to ignore news that Tyco could face a major cash crunch by the end of 2003.

Tyco (TYC: Research, Estimates) shares gained $1.74, or more than 11 percent, to close at $17.09.

During a conference call Tuesday morning, Tyco management said it may seek to sell assets in order to meet debt obligations for fiscal 2003 and beyond. According to the company's annual 10-K filing with the SEC Monday, Tyco has $7.7 billion of debt maturing within the next fiscal year -- and nearly $6 billion of that is due in February.

Tyco CEO Edward Breen said he is confident he and Tyco finance chief David Fitzpatrick can negotiate a new credit agreement with its banks. "We remain confident that we will be able to obtain a bank facility in advance of our February maturities. We continue to believe the company should be run with a capital structure that merits an investor-grade rating," Breen said during the call, according to the Associated Press.

Tyco is also exploring the sale of convertible debt securities. In addition, the company said it expects a cash deficit, or funding gap, of $3.6 billion in the first quarter of fiscal 2004, more than double previous estimates.

Management also gave earnings guidance for fiscal 2003 of between $1.50 and $1.75 a share but did not discuss any of its specific businesses in detail. According to earnings tracking firm First Call, analysts currently expect Tyco to earn $1.58 a share in fiscal 2003, which ends in September.

In addition, the company set plans that called for 18,296 job cuts in 2002, but not all of the cuts have taken effect and are subject to revision, according to Reuters, citing Tyco's annual report.

Tyco's stock has plunged nearly 74 percent this year, in part due to concerns about aggressive accounting and its debt-laden balance sheet. The company has also seen its fair share of scandal. Former Tyco CEO Dennis Kozlowski has been indicted on charges of tax evasion. Kozlowski and former CFO Mark Swartz also have been accused of stealing hundreds of millions of dollars from the company. Both men have pleaded not guilty.

But on Tuesday investors seemed to focus more on the lack of fraud than the looming debt problems. Tyco's shares soared 12 percent as of midday and were the most actively traded on the New York Stock Exchange. The shares finished at $17.09.

Wall Street is divided as to whether Tyco is now in the clear. David Bleustein, an analyst at UBS Warburg, said in a research note that if Tyco can close the funding gap, that could serve as a catalyst for the stock. He rates Tyco shares a "strong buy." Tyco expects to generate up to $3 billion in cash flow during fiscal 2003.

Lehman Brothers analyst Robert Cornell wrote in a report Tuesday that the favorable accounting review, conducted by noted attorney David Boies, represents "essentially a clean bill of health for the company going forward."

Tyco admitted that previous management used aggressive bookkeeping to boost results and said that shoddy records and inadequate policies had existed. Cornell has an "overweight" rating on the stock and a price target of $25, more than 40 percent higher than current levels.

Several high profile value fund managers are also big fans of Tyco. The stock is the third-biggest holding of Bill Miller, whose Legg Mason Value Trust has beaten the S&P 500 for 12 years in a row. (For more, see Miller: Buy Tyco.)

And it's the top holding of Don Yacktman, who is one of the few stock fund managers to have winning years for the past three years. (For more, see: One fund manager who got it right.)

But Nicholas Heymann, an analyst with Prudential Securities, recently wrote in a research note that sharp declines in Tyco's profit margins, $1.7 billion in underfunded pension plans, higher debt costs and general economic uncertainty could diminish the conglomerate's cash flow prospects. As of last week, Heymann had a "hold" rating on Tyco.

Short sellers, who bet that a stock will go down, are also still circling the company. As of Dec. 13, 51.4 million shares of Tyco were being held short. That's about 3 percent of the total amount of available shares outstanding.

Tyco's balance sheet could also take a hit from further asset write-downs. The company's failed undersea fiber optic cable network triggered a $2.5 billion charge in fiscal 2002 amid a glut of capacity and a trickle of revenue. Some analysts see more big-ticket write-downs at the network.  

-- from staff and wire reports