...com

* Deal to cut gross senior debt by 45 pct to 1.55 bln euros

* Debt conversion deal includes 350 mln euro rights issue

* Preliminary H1 EBIT 51 million euros, up sharply

(Adds more details, earnings)

By Dominique Vidalon

PARIS, July 24 (Reuters) - French media technology group Thomson SA () said it had reached a debt-for equity restructuring deal with creditors to slash 45 percent of its 2.9 billion euros ($4.1 billion) debt and secure its survival.

The supplier of set-top boxes, DVDs and video and telecom equipment said on Friday that a majority of its senior creditors had agreed to the deal that involves a 350 million rights issue and the issuance of 639 million euros of notes redeemable in shares.

"We have achieved a balance preserving the interests of the company and its stakeholders. We will now benefit from a stabilised financial situation, which will allow us to focus on our customers and operations," Chief Executive Frederic Rose said in a statement.

Last month, Thomson said it had made a restructuring proposal to creditors who were owed 2.9 billion euros. It had until July 24 to seal a deal. [ID:nLR123488]

The restructuring agreement, which is expected to be approved at a shareholders' meeting in the fourth quarter, will cut Thomson's gross senior debt to 1.55 billion euros.

Creditors have agreed to reinstate the remaining debt and divide it into four tranches.

Under the deal, 1.289 billion euros of senior debt will be converted into newly issued shares through a 350 million euro rights issue and into notes redeemable into shares (ORA) for 639 million euros.

Up to 300 million euros of debt will also be converted into disposal proceeds notes (DPN). These will be repaid at maturity in December 2010 by the proceeds from Thomson's planned sale of the Grass Valley, PRN and Screenvision operations.

Existing Thomson shareholders will be able to participate in the 350 million rights issue, which will be the issuance of 528 million ordinary shares at 0.66 euros per share.

Existing shareholders can retain up to 52 percent of the capital but no less than 15 percent of the company's share capital, depending on the rights issue takeup and ORA subscriptions.

Thomson breached its debt covenants and has been in talks since February with creditors to restructure a balance sheet that had negative shareholder equity of 134 million euros at the end of 2008.

The deal also provides for Thomson to keep 400 million euros of cash on its balance sheet at closing. It will also have access to further liquidity through 150 million euros of receivable backed financing facilities.

H1 EBIT IMPROVED

Thomson, which competes with Motorola (), Siemens () and Sony Corp (), has been hit by a weak operating performance and loss-making activities that have burnt through its cash pile.

The group's key clients include film studios, software and games producers such as Microsoft () and Electronic Arts (), European and American broadcasters, satellite operators and telecoms groups such as France Telecom ().

To cut debt, Thomson SA has vowed to sell businesses that contributed around 1 billion euros to its 2008 sales, including broadcast and TV/film equipment maker Grass Valley, advertising unit PRN, and cinema advertising unit Screenvision.

The group on Friday also released preliminary first-half results, which it said showed a "marked improvement in operational profitability" despite a challenging economic climate.

Revenue fell 1.9 percent at 1.801 billion, while earnings before interest and tax (EBIT) rose 30 million euros to 51 million euros.

The group incurred a net loss of 25 million euros after a 305 million euro impairment charge resulting mainly from the Grass Valley and PRN disposal process.

Net debt at the end of June was 2.311 billion euros and the group's estimated cash position was 511 million euros.

Thomson shares closed up 5.6 percent at 0.72 euros, giving it a market capitalisation of 193 million euros. The shares have fallen 25 percent so far this year after slumping 90 percent last year. ($1=.7043 Euro) (Editing by Karen Foster)