Time and (pounds) 12bn debt burden begin to weigh on NTL chiefs;Money worries overshadow tottering cable giant and embattled sports network

Kristy Dorsey

NTL, the UK's largest provider of cable and residential broadbandinternet, is running out of time and money as it continuesdiscussions about the restructuring of its (pounds) 12bn debtmountain.

As the US-listed company announced an (pounds) 8bn writedown onthe value of its goodwill and other intangible investments,observers waited in vain yesterday for further information on whatwould be one of the biggest corporate restructurings in recenthistory. In a conference call with investors, NTL executives tookthe unusual step of declining to take any questions.

However, the company said in a statement that meetings with itsbondholders and creditors were continuing. These are aimed atcutting debt built up during the telecoms boom, when NTL raisedbillions of dollars on Wall Street to help build its UK fibre opticnetwork and finance European acquisitions.

An announcement on the restructuring is expected no earlier thanJuly, by which time NTL may have run out of cash to keep thebusiness going. Reports from the US say NTL has already drawn downthe remainder of a $500m-plus ((pounds) 360m-plus) credit line thathad been expected to last until the summer.

In yesterday's statement, NTL warned: "There can be no assurancethat we will successfully complete a recapitalisation or financingin a timely manner in order to sustain the company's operations."

Given these uncertainties, NTL's auditors will be forced to issuea health warning with the year-end accounts. These will show full-year earnings of (pounds) 492m before interest, tax, depreciation,and amortisation, but a net loss of (pounds) 11bn after exceptionalitems.

NTL's cable network covers about 50% of the UK and has some threemillion residential customers. Its other European assets include thewholly-owned NTL Ireland and Switzerland's Cablecom, a 27% stake inFrance's Noos, 34% of B2 in Sweden, and 32.5% of Germany's eKabel.

In addition to reducing the value of these and other investmentsby (pounds) 7.6bn, NTL's year-end figures were also hit by (pounds)63m in redundancy costs. These arose as it reduced staffing by 6500,leaving its headcount at 13,600 at the year-end.

NTL announced in January that it had appointed JP Morgan, MorganStanley and Credit Suisse First Boston to advise on restructuring.At that point, analysts estimated that an exchange of (pounds) 7.7bnin bond debt for NTL equity would leave existing shareholders with15% or less of the company.

However, there are now suggestions that bondholders may ask for100% of the business in exchange for forgiving the debt. Existingshareholders might then be offered some sort of "consideration",such as the opportunity to participate in a rights offering.

The biggest stumbling block to this would likely be FranceTelecom, which holds about 22% of NTL's shares. It wrote down thevalue of that investment last week, but is likely to oppose any dealthat would wipe out its remaining value.

Most agree there is no possibility of NTL receiving furtherinvestment until the debt issues are sorted out. According to onlinebond information service Advantage Data, the company has at least adozen outstanding issues denominated variously in dollars, pounds,and euros.

Potential strategic investors are thought to include US-basedLiberty Media and AOL Time Warner. Liberty owns much of Telewest, soa deal with NTL could signal the long-anticipated merger of the twoBritish companies.

NTL is also talking to the New York Stock Exchange about itsshare price and market capitalisation, both of which have fallenbelow limits required for the stock's continued listing. From a highof some (pounds) 28 just 18 months ago, the shares were yesterdaytrading in the region of 14p.