UPDATE 2-Tiscali to miss debt payment as asset sales falter

* Talks with BSkyB "almost impossible" to continue

* Asks banks to suspend interest repayments

* New industrial plan to board on March 27 (Adds estimates on asset value, context)

MILAN, March 6 (Reuters) - Italian Internet company Tiscali (TIS.MI) said it would ask bankers to suspend interest payments after its lengthy talks on UK assets with broadcaster BSkyB (BSY.L) became "almost impossible" to continue.

In a statement made after its shares were suspended, the debt-laden company said it had not reached an accord with BSkyB and now market conditions for both sides had deteriorated.

As a result, Tiscali said it would ask banks "to allow a period of suspension for interest repayments ... and financial covenants."

Its next interest payments, for a total of 11 million euros ($13.91 million), are due on March 11 and 13, it said. Long-term debt stands at 500 million euros, 400 million euros of which is a loan and the rest are credit facilities.

Tiscali said in November 2008 it was discussing a sale of UK assets with BSkyB and in January, it said it hoped to conclude the sale process by the end of March.

At the end of last year, there were reports Tiscali's British assets were worth about 500 million pounds ($711.2 million).

Tiscali shares closed down 4.66 percent at 0.2865 euros before the suspension in a market down 3.87 percent. The company has a market capitalisation of around 185 million euros.

Tiscali is the latest Italian company to feel the chill of global market turmoil and have to suspend debt repayments.

Car designer Pininfarina (PNNI.MI) rescheduled debt and its family owners agreed to sell out to creditors in December, while fashion company IT Holding ITH.MI is in special administration after asking creditors for more time to pay.

Tiscali said a new industrial plan would go before the board on March 27 when it would also look at 2008 results.

Tiscali's long-term debt was originally underwritten by Intesa Sanpaolo (ISP.MI) and JP Morgan (JPM.N), the company said in the statement. About 30 percent has been subsequently underwritten by four additional financial institutions.

It said pre-close figures for 2008 showed core earnings (earnings before interest, tax, depreciation and amortisation) of about 200 million euros and sales of about 1 billion euros. ($1=.7030 Pound) ($1=.7909 Euro) (Reporting by Jo Winterbottom; Editing by David Cowell)