NTL Files Pre-Packaged Chapter 11

As expected, NTL Inc. filed a pre-packaged Chapter 11 bankruptcy plan, after receiving approval from its lenders and bondholders.

NTL — which is based in New York but owns cable operations in the United Kingdom and Europe — initially announced it would file a pre-packaged Chapter 11 in April, as part of an overall restructuring.

As part of that deal, NTL will split into two separate entities: NTL U.K. and Ireland and NTL Euroco. Bondholders, who were owed roughly $10.6 billion, would swap that debt for 100 percent equity in NTL U.K. and Ireland, and about 86 percent of NTL Euroco's equity. Bondholders also agreed to invest about $500 million in NTL U.K. and Ireland.

The Chapter 11 bankruptcy will not involve any of NTL's operating companies. Instead, it will involve several holding companies it had used as financing vehicles in the past.

Also as part of the deal, France Telecom — which has an 18 percent equity stake in NTL and also owns preferred stock in the company — will receive a package of rights and warrants entitling it to purchase as much as 23.6 percent of NTL U.K. and Ireland's equity.

France Telecom also gets control of Noos S.A., a French cable company that was a joint venture between FT and NTL.


NTL spokesman Steve Lipin said that the company hoped to emerge from Chapter 11 by September.

"Clearly, this has to be reviewed by the courts," Lipin said. "Because it is a pre-packaged filing, it should be expedited. If we're out [of bankruptcy] by September, we hope to be a stronger, delevered company."

The bankruptcy is evidently the final stage in what has been a contentious past few months for NTL. Saddled with high debt, the company faced increasing pressure from investors and bondholders to pare down its obligations.

The reorganization will cut NTL's debt to about $7 billion. The U.K. and Ireland unit will have $5.5 billion in bank and bond debt; Euroco will hold the remainder. The company's overall $23.37 billion in debt includes $5.8 billion of preferred stock, which the bankruptcy reorganization will abolish.

NTL amassed the debt as part of an $18 billion buying spree, spearheaded by its CEO Barclay Knapp at the height of the telecommunications boom.

As the telecom bubble burst, though, Knapp and NTL found themselves in trouble. Declining revenue and cash flow at the MSO's core businesses made it hard for NTL to service its debt.

Knapp and his management team had been under fire for months, as NTL stock sank to all-time lows. Shares have fallen by 98 percent in the past six months, from $4.55 last Oct. 15 to 9 cents on April 15.

NTL was delisted by the New York Stock Exchange in March, after failing to maintain a share price of at least $1 each for 30 consecutive days.

In the days after the restructuring announcement, NTL stock more than tripled, to 29 cents apiece. But the stock has since fallen back, closing at 12 cents on May 8.


Knapp and his team are expected to stay with NTL through the bankruptcy filing. After that, bondholders will determine their fate.

As part of the reorganization plan, bondholders will select a new nine-member board of directors to guide the company. It will decide who will run NTL.

"Barclay is the CEO," Lipin said. "All these decisions about management will come from the new board [of directors]. He will remain the CEO during this process. The management of the new NTL will be picked by the new board and the shareholders."

The debt problems have overshadowed what was a relatively good year for NTL, with the company hitting its revenue and cash-flow targets, despite pressures to restructure its debt.

Revenue for 2001 was $2.57 billion, in line with guidance of $2.6 billion. The company also reported year-end cash flow of $159 million, beating its previous estimate by $4 million.

NTL reported a loss of $12.75 billion, or $46.46 per share, largely because of a write-down of $11 billion in intangible assets and investments in unconsolidated affiliates.