* Says creditor talks are constructive
* Shares fell 20 percent on default rumour
* Moody's downgraded on Tuesday
* Deadline for creditor talks June 16
(Recasts, adds closing price, market value, rivals)
By Julien Ponthus
PARIS, May 20 Debt-laden French multimedia firm Thomson SA TMS.PA, which brings Technicolor to cinemas and set-top boxes to households, on Wednesday called rumours of its bankruptcy groundless after its shares dropped steeply.
It said talks with banks and bondholders owed some 2.9 billion euros were "going on and are constructive."
Traders said the shares, which closed down 15 percent after plunging as much as 20 percent, were hit by rumours the company was close to bankruptcy.
"It is without foundation, we are not bankrupt," said a company spokeswoman.
The group, which had a stock market capitalisation of 220 million euros at Wednesday's close, has been given a deadline of June 16 by its main creditors to complete months-long talks over its borrowings.
To cut debt, Thomson has vowed to sell businesses that contributed around 1 billion euros to 2008 sales, including Grass Valley, advertising unit PRN and cinema advertising unit Screenvision.
Credit rating agency Moody's on Tuesday raised the probability of Thomson defaulting following what Moody's said was a failure to repay $92.5 million private placements due on May 18.
The company, which competes with the likes of Motorola MOT.N, Siemens (SIEGn.DE) and Sony Corp (6758.T), warned in January it was likely to breach debt covenants and said it was in talks with creditors and potential equity investors regarding its balance sheet, its debt and ways to prevent an acceleration of its senior debt.
A trader said Thomson credit default swaps traded 5 percentage points wider at about 57 percent upfront, meaning that the seller of protection is demanding a downpayment of 5.7 million euros to protect 10 million euros of the company's debt against default.
The group has not given much details on its talks with creditors, but chairnan and chief executive Frederic Rose has said they covered several options, including the possibility for creditor banks to exchange debt for equity.
The group's cash position at end-March 2009 stood at 586 million euros and its net financial debt as of March 31 was 2.357 billion euros.
It said on Wednesday it had asked France's financial markets regulator AMF to probe the share fall which it blamed on "inaccurate and misleading" information in some media. (Reporting by Julien Ponthus, Blaise Robinson in Paris and Natalie Harrison in London, editing by Marcel Michelson and David Cowell)
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