Debt Swap Thumbs-Up for NTL as CEO Eyes Telewest Deal

06 May 2002

NTL – the cable operator listed in the US but operating mainly in the UK – has secured the agreement of its banks and bondholders for the debt-for-equity swap it proposed last month [WAMN: 17-Apr-02].

The restructuring deal, which will hand bondholders effective control of the company in return for writing-off debts totalling $10.6 billion (€11.6bn; £7.2bn), gained the thumbs-up last week from NTL’s banking syndicate, led by a committee of bondholders and J P Morgan and Morgan Stanley.

The cable firm is expected to file for Chapter 11 bankruptcy protection in the US by today (Monday). Its British businesses will continue as usual for a sixty-day period before the emergence of a restructured company.

At this point, NTL is expected to step up merger talks with smaller UK rival Telewest Communications, also US-owned. Marriage between the pair has long been the subject of market speculation and recently both companies have been making positive noises about merger prospects.

“It makes a lot of sense for us to get together,” NTL chief executive Barclay Knapp declared last week, “and we look forward to taking that issue up again when we come out of [the restructuring] process.”

His comments followed a remark by Telewest finance director Charles Burdick that the logic for a merger was “strong, if not stronger than ever.”

Like NTL, Telewest is struggling beneath a debt mountain, in the region of £5.3bn, and last week announced 1,500 redundancies as it seeks to cut costs.

Pressure on Telewest to make a debt-for-equity exchange similar to that of NTL is growing. However, it still has cash reserves and is looking at other ways to reduce its liabilities, such as the sale of its Flextech content division.

“We do have choices on timing [a restructuring],” said chief executive Adam Singer. “NTL and others did not have choices because they were running out of cash.”

Data sourced from: Financial Times; The Times (London); additional content by WARC staff