Creditors of Atos are set to take control of the financially-stricken IT giant after agreeing a deal that will see much of the company’s debt converted into equity.

The company announced on Sunday that it had agreed a rescue package with creditors that will see bonds and debt worth €3.1 billion ($2.9bn) converted to equity.

Under the plan, the group of creditors could provide €1.68 billion ($1.81bn) of new debt and €233 million ($250.7m) in new equity, either themselves or alongside a private investor.

Atos is one of France's most important technology companies and holds a string of public and private sector IT contracts across Europe. But it has been in the doldrums for several years, having failed to adapt to the shift by businesses to the cloud.

Hindered by a growing debt pile - the company owes €4.65 billion ($5.05bn), €3.65 billion ($3.9bn) of which is due to be paid back by the end of 2025 - it announced in 2021 that it was splitting its business into two separate units - Eviden and Tech Foundations - as part of a turnaround plan designed to return the company to growth.

Eviden manages the firm’s cloud, cybersecurity, data, and supercomputing efforts, which are seen as potential growth areas for the business, while Tech Foundations oversees its less-profitable legacy managed infrastructure contracts. Atos operates five of its own data centers according to Data Center Platform, three in France and one each in Austria and Germany.

Though the initial idea was to run Eviden and Tech Foundations as separate, publicly-listed, businesses under the Atos umbrella, the debt problems facing the company have led to both units being put up for sale.

A planned acquisition of Tech Foundations by private equity fund EPEI fell through last year, while in March it was confirmed that talks between Atos and Airbus, which would have seen the latter purchase part of Eviden for €1.8 billion ($2bn) had been called off too.

A previous rescue proposed for the business, spearheaded by the company’s largest shareholder, IT consultancy Onepoint, collapsed last week after several weeks of talks. “The conditions were not met to conclude an agreement paving the way for a lasting solution for financial restructuring,” an Onepoint statement said.

The scale of the problems facing Atos was highlighted in the annual report of its UK division, published last month, which said the debt issue may “cast significant doubt on the company's ability to continue as a going concern."

According to The Register, which first reported the news, Atos holds public sector contracts worth £2.4 billion ($3bn) in the UK.