NEW YORK, FEB. 18 -- American Standard Inc.'s board approved a multibillion-dollar recapitalization plan today, escalating the company's battle to thwart the hostile $2.1 billion takeover bid by Black & Decker Corp.

The plan would pay American Standard stockholders $64 a share in cash and junk bonds and give them stock in the recapitalized company, which would be saddled with the $1.8 billion in debt needed to fund the proposal.

Black & Decker, based in Towson, Md., is offering $65 a share for American Standard, a New York-based maker of plumbing and construction products.

American Standard stock rose 50 cents to $67.50 a share today and Black & Decker dipped 12 1/2 cents to $18.87 1/2.

Black & Decker, which makes power tools and appliances, had no comment on American Standard's announcement.

American Standard, which last week rejected Black & Decker's takeover offer, indicated at the time it was considering alternatives to the hostile bid that included a recapitalization, leveraged buyout or restructuring.

Recapitalizations, in which a company realigns its levels of debt and equity, often are used as takeover defenses because they make a target much more expensive.

"The recapitalization not only gives the stockholders significantly higher value than the $65 being offered in Black & Decker's tender, but also enables them to retain a substantial ongoing equity interest in a viable American Standard," William Boyd, American Standard's chairman, said in a statement.

American Standard said that under its plan shareholders would get $59 in cash and high-yielding debt securities it valued at $5 for each of the company's 31.1 million outstanding shares.

Shareholders also would receive one common share of the recapitalized company for each of the common shares they held currently.

The company also would convert the 1.23 million of its shares held by an employee savings and stock ownership plan into shares of the recapitalized company at a ratio to be determined after the actual recapitalization.

The plan must be approved by shareholders and was subject to sufficient financing being arranged. A special shareholder meeting was planned for April to consider the proposal, the company said.

American Standard said it planned to finance the recapitalization with $1.6 billion in bank borrowing and the sale of $225 million in senior subordinated debentures.

Separately, a federal court hearing was held in Delaware over Black & Decker's constitutional challenge to that state's new antitakeover law. American Standard is incorporated in Delaware.

The law limits a hostile buyer's ability to sell a target firm's assets to finance a takeover. Black & Decker has indicated it plans several major divestitures of American Standard property to help finance its buyout if successful.