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Liberty Helps UGC Founder Cover Margin Calls

Liberty Media Corp. chairman John Malone bailed out long-time friend and associate Gene Schneider earlier this month with a $5.1 million loan to help the UnitedGlobalCom founder and chairman cover margin calls.

Margin calls typically occur after someone pledges stock as collateral for a loan and then watches the stock plummet in value. The lender, left without adequate collateral, then demands cash or more stock to secure the loan.

According to a Securities and Exchange Commission filing June 25, Liberty Media made the loans to Schneider and G. Schneider Holding LLP, a limited liability partnership, "following receipt by Mr. Schneider and Schneider Holdings of margin calls in connection with certain indebtedness with a commercial bank."

Schneider pledged 4.3 million shares of UGC's Class B stock as collateral for the Liberty loans. Although Class B shares are not publicly traded, they can be converted to Class A shares which are. Given UGC's closing stock price of $2.59 on June 26, those 4.3 million Class B shares could be worth as much as $11.1 million.

Liberty already owns a majority stake in UGC, which is one of the largest cable operators in Europe. The two companies finalized a deal that gave Liberty a 75 percent stake in UGC earlier this year.

Intercompany loans have come under intense scrutiny in the past few months, in light of the WorldCom Inc. and Adelphia Communications Corp. accounting scandals.

A cable industry pioneer, Schneider started United Cable Television Co. in Casper, Wyo., in 1952, later selling it to Malone's Tele-Communications Inc. He then started UGC Holdings in 1989, building it into one of the largest cable operators in Europe, with 10 million subscribers in 14 countries. Worldwide, UGC now reaches 18.9 million homes in 26 countries.