US cable kahuna John Malone, bloodied but unbowed from his defeat at the hands of Germany’s cable regulators, also retired bruised from the negotiating table last week after the failure of his $2 billion (€2.27bn; £1.39bn) cash bid for debt-disabled UK cable operator NTL.
According to insiders, Malone was willing to hand over nearly two billion greenbacks as a bond-swap with NTL bondholders. The residual cash would cover NTL's high capital and restructuring costs over the next two years. In return, Malone’s Liberty Media would collar fifty per cent of the equity in a restructured NTL.
But his offer was outflanked by the wily Barclay Knapp, chief executive of US-owned NTL, who knows how to borrow a trillion or three. Knapp’s alternative plan was perceived by the majority of the parties as “more bondholder friendly”.
Bondholders were reminded that, once upon a time, Liberty had a €1bn loan note at Belmarken, a unit of Dutch cable group UPC. This placed Liberty firmly into the driving seat in talks to restructure UPC bonds, which then collapsed in price. “Bondholders have lived through the Belmarken experience. It didn't turn out well for UPC bondholders,” said one scarred negotiant.
Although the detail of Knapp’s counter-plan is sketchy, discussions are continuing in New York and seem likely to leave bondholders with at least 95% of the equity in a restructured NTL. Unlike the Malone proposal, the Knapp scheme would allow bondholders to control the company and its future fiscal strategy.
Data sourced from: Financial Times; additional content by WARC staff