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Bondholders take control of NTL

Knapp: NTL was caught in telecom meltdown and made lots of mistakes
Knapp: NTL was caught in telecom meltdown and made lots of mistakes  


LONDON, England -- NTL, Britain's heavily-indebted cable television operator, has handed the company over to its bondholders and will seek bankruptcy protection in the United States.

NTL and its bondholders have agreed to a debt-for-equity swap, totalling about $10.6 billion, the company said on Tuesday. NTL will also receive a cash injection of $500 million.

Also under the agreement, NTL and its non-operating subsidiaries will file for Chapter 11 protection from creditors as it sorts out its financial problems. However, the company said all of its business operations will continue as normal thanks to the agreement with bondholders.

In addition, NTL will be split into two companies. One will be called NTL UK and Ireland and the other NTL Euroco, which will hold the company's continental assets as well as other businesses.

Bondholders will control 100 percent of NTL UK and have about an 86.5 percent stake in NTL Euroco.

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NTL's Chief Executive Barclay Knapp talks about the group's future with CNN's Paula Hancocks.

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NTL, which has built up $17.5 billion through rapid expansion and acquisitions over the past two years, said the restructuring deal would produce $800 million in annual interest savings.

"We were part, unfortunately, of the telecom meltdown," Chief Executive Barclay Knapp told CNN. "We regret a lot of the decisions and mistakes we made."

Knapp said Tuesday's agreement would "allow us to resuscitate the company" and continue operating, adding that despite its financial problems NTL still has annual revenue of $4 billion and cash flow of $1 billion.

The group, which is based in the UK but is publicly listed in the U.S., had been expected on Monday to make an interest payment of $17.7 million on $278 million worth of bonds issued by the group's U.S. subsidiary, NTL Communications. NTL said on Tuesday it would not make the payment.

In January, NTL appointed three investment banks -- Credit Suisse First Boston, JPMorgan and Morgan Stanley -- to assist in restructuring the company's debt.

NTL posted a $16 billion loss for 2001 and announced in March that it was being delisted from the New York Stock Exchange because its share price had fallen below limits set by the exchange.

NTL's share value has plunged from $38 to less than 10 cents in the past year as debt concerns have mounted. The company is now trading on the much smaller U.S. over-the-counter market, where its shares closed at 9.4 cents on Monday.

In addition to cable TV service, NTL also provides telephone and Internet access over its networks. It has about 8.7 million subscribers, mainly in Europe. It has 3 million customers in the UK.

Meanwhile, there is speculation that the UK's other big cable group, Telewest Communication (TWT), could follow NTL's lead and swap its debts for equity -- a move that would also give Telewest's bondholders control of the company.

In March, Telewest's Finance Director Charles Burdick said the company had "pitched various ideas" to it shareholders for restructuring its £5 billion debt.

Since then, Telewest's share value has been cut in half. Its shares were down 2.4 percent to 9.99 pence in midday trading on Tuseday in London. That puts the company's capitalisation at about £280 million.

"Telewest has made it clear it is looking at various options and clearly the outcome of their discussions will determine whether the company goes down the restructuring route and more importantly when that may happen," Chavan Bhogaita, telecoms credit analyst at Bear Stearns, told Reuters.





 
 
 
 




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