UPDATE 5-Portugal Telecom loses chunk of Oi merger over unpaid Espirito Santo debt
* PT stake in merged company cut to 25.6 pct from 38 pct in old terms
* Portugal Telecom and Oi shares up in relief over tie-up
* PT to sue Espirito Santo company Rioforte to recover debt
* PT has option to buy back Oi shares if recovers money
* Still unclear on size of losses facing Banco Espirito Santo (Adds BES, PT closing prices, details on talks)
By Axel Bugge and Leila Abboud
LISBON, July 16 (Reuters) - Portugal Telecom has been forced to take a cut in its share of a merger with Brazil's Grupo Oi after a holding company of the Espirito Santo family failed to repay more than $1 billion it owed to the telecom company.
Portugal's largest telecoms provider said it would take legal action to try and recover the debt from the family company, Rioforte, which fell due on Tuesday.
The revision of the terms of the merger with Oi is the most high-profile consequence so far of the escalating troubles of the Espirito Santo clan, once one of Europe's premier business dynasties. Continuación...