Debt-laden cable group NTL today announced a restructuring deal converting approximately $10.6bn of debt into shares, and $500m in new financing.
The life-saving debt-for-equity swap was agreed with an unofficial committee of public bondholders, and comes after NTL defaulted on paying $96m in interest due on some US bonds on 1 April.
Under the deal the company will split into two, with NTL UK and Ireland holding all of its UK and Ireland assets, and NTL Euroco holding certain of its continental European and other assets.
In the US, the group will file for Chapter 11 bankruptcy protection to implement the recapitalisation, after which bondholders will own over 50 per cent of the face value of NTL and its subsidiaries' public bonds.
NTL said that "operations will continue uninterrupted, customer service will be unaffected, suppliers will be paid in the ordinary course, and NTL's management will remain in place".
During the Chapter 11 process bondholders will provide up to $500m of new financing to NTL's UK and Ireland operations to ensure that they have access to sufficient liquidity to continue ordinary operations.
President and chief executive Barclay Knapp said: "The agreement in principle we are announcing today is a major step towards our goal of ensuring the successful completion of the recapitalisation that NTL announced in January.
"We are currently working with all parties in our capital structure, including the company's bank lenders, to finalise these arrangements.
"The US-based Chapter 11 process will allow NTL to reorganise and re-emerge stronger and healthier, without affecting operations."
But Lars Godell, senior telecoms analyst at Forrester Research, said: "This deal dresses up the balance sheets. It is financial re-engineering to stave off bankruptcy. It does not convince me that NTL is addressing operational strategic issues. It is a deal for the short-term."
He added that in order to succeed NTL must confront "operational choices over wholesaling its data and TV services to other interested parties such as internet service provider resellers and telcos.
"NTL needs more revenue. It fears giving away its strategic advantage and control of its technology platform, but cable is losing out because it needs to open up."
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