(Telecompaper) Portugal Telecom has agreed to a smaller stake in its merger with Brazil's Oi, after Rioforte defaulted on its debt owed to PT. The company confirmed that Rioforte, a company of Espirito Santo Group (GES), failed to pay the EUR 847 million due on 15 July, of the EUR 897 million in short-term debt outstanding at PT. Espirito Santo holds a 10 percent stake in PT, and the Portuguese operator has defended the investment as treasury management. The Rioforte debt is held in subsidiaries contributed to Oi in May, but two representatives of the Brazilian group stepped down from the PT board after the risky nature of the debt came out due to GES financial problems. The two operators have now agreed to a series of options to reapportion the debt across the two groups and revise their new shareholdings, in order to complete the merger as soon as possible. Portugal telecom shareholders will hold just 25.6 percent in the merger company CorpCo, down from as much as 39.6 percent under previous agreements. This could increase later if any of the Rioforte debt is recovered. PT said it plans to take legal action against GES, with the support of Oi.