NTL has announced a rescue package with a syndicate of bondholders that will result in the break-up of the debt-laden cable operator into two companies, which will be controlled by the company’s creditors.
The deal will see the British and Irish operations separated from the continental European business under a plan in which $10.6 billion (€12bn) of NTL bonds will be converted into equity.
The deal has yet to be approved by NTL’s banks and minority bondholders, but its endorsement is viewed as highly likely. The company’s restructuring, which will drastically reduce NTL’s overall debt, is expected to be finalised by the end of the summer. NTL is headquartered in New York but its main market is in Europe.
Some of the group’s subsidiaries will file for Chapter 11 bankruptcy protection in the US. Bondholders will take 100% control of NTL’s British and Irish operations and will own approximately 86.5% of ‘NTL Euroco’, a unit that includes the group’s continental European assets.
To provide working capital, the company will issue new bonds worth $500 million (€566.2 million), which will be ploughed into NTL’s British and Irish operations. Although the financial restructuring will enable the cable group to resume capital expenditure, the two companies will still be saddled with about $8 billion (€9.05 billion) in debt. NTL currently owes $17 billion (€19.2 billion).
Separating the profitable British arm of the company from its loss-making continental European units was one of the creditors’ main demands. NTL is the largest cable group in the UK, but the re-capitalisation may prove difficult because France Telecom, for instance, has said that it does not intend to inject any more cash into the company.
