UPDATE 1-Vonage revises terms of its debt financing

(Adds details on refinancing effort)

SEATTLE Oct 7 (Reuters) - Internet-based phone company Vonage Holdings Corp (VG.N) said on Tuesday that it revised the terms of its debt financing deal, clearing a hurdle in its attempt to refinance about $253 million of notes.

Vonage, a pioneer in selling Web phone services, had already extended the deadline for a cash tender offer for its convertible notes due 2010 three times while it tries to finalize debt financing.

A company executive had said securing the debt financing was critical to ensuring that the company remain independent.

The company said Silver Point Finance LLC is expected to lead financing for $220.3 million in debt, consisting of $130.3 million senior secured first lien credit, $72 million of senior secured second lien debt and $18 million of convertible secured third lien notes.

The agreement changes the terms of the deal Vonage agreed to with creditors in July 2008 when it announced that it had secured up to $215 million in debt consisting of $95 million senior secured first lien credit and $90 million of convertible secured second lien notes.

Vonage's previous financing deal also contemplated raising up to another $30 million of senior secured first lien credit from a syndicate of lenders.

The new terms also included changes in interest rates of the debt and convertible notes. The deal is expected to close in Nov. 2008.

The company would not address how the recent financial crisis and credit crunch affected the decision to revise the terms of its financing deal with Silver Point.

But Vonage had faced challenges even before the credit crisis, posting losses since its launch due to high costs and competition with Skype, a unit of online auction company eBay Inc (EBAY.O), as well as cable service providers. (Reporting by Daisuke Wakabayashi; editing by Carol Bishopric)