Switch from Normal Password to OAuth2 - Hotmail/Outlook.com

Microsoft wants everyone to switch to OAuth2 instead of using plain Passwords in their email clients.

I have tried everything (short of deleting the accounts in Thunderbird & creating them again) as per suggestion of both Microsoft & Mozilla but nothing works. It gets stuck at "Host contacted; sending login information..." whenever I change the Authentication method to OAuth2. Changing it back to Normal authentication gets my mails.

Has anyone been able to setup Thunderbird for Hotmail/Outlook.com email accounts?

I am using POP & have tons of filters with many local folders. The mail box contains mails from last 20 years.