Ailing NTL bails out boss's firm

STRUGGLING cable group NTL, weighed down by crippling debts, has spent £10m bailing out a separate company run by founder Barclay Knapp. News of the extraordinary move, which came just weeks before NTL announced thousands of job losses, is a major embarrassment for Knapp as he tries to restructure debts of $17bn (£12bn).

Last week, NTL was forced to deny it had liquidity problems that would threaten services to the company's three million phone and digital TV subscribers in Britain.

Documents filed with stock market regulators in America, where NTL is listed, show Knapp is also chief executive and finance director of CoreComm, a US telecoms company.

Earlier this year, NTL backed a refinancing of CoreComm, pumping in a total of $15m. The investment was linked to an agreement to join the two firms' phone networks.

But industry sources say NTL, which has no operations in America, could have gained access to US networks far more cheaply on the open market. One telecoms executive said: 'It is odd to lock the group in to a single provider when prices for bandwidth are falling at 40% a year. About £1m seems a more feasible price.'

Knapp's dual role as chief executive of both CoreComm and NTL is now under close scrutiny. Nell Minnow, director of US corporate governance watchdog The Corporate Library, said: 'Holding two chief executives' jobs is a very big deal. I'd guess that both companies are disadvantaged by this dual role. The board should be thrown out.'

Minnow said the main question was how much time Knapp would be able to devote to each company. 'Shareholders expect that their chief executive is working for them full time,' she said. 'How can he devote 100% to both companies?'

Both NTL and CoreComm are based at the same New York address and share the same chairman, George Blumenthal, but they have very different operations. Almost all of NTL's business is in Europe while CoreComm competes with local phone companies in the US.

NTL has spent £23bn buying cable TV franchises around the UK over the past two years. But it is negotiating with banks and bondholders to whom it owes £12bn. Analysts expect the group to try to swap some of the debt for shares in the company. The bondholders have appointed London law firm Cadwalader, Wickersham & Taft to act on their behalf.

The earlier bondholders become involved in any restructuring, the better deal they are likely to get. A source close to the group said: 'We expect there to be a restructuring and the market says the time is right. We may suggest to NTL that it is a sensible thing to sit down and discuss this at an early stage while there is still time. Certainly, the market has reached a judgment that the current situation is not sustainable for long.

'NTL has a mind-boggling capital structure. There would be a staggering amount of money on the table and it would take some time to sort it out.'

British and European bondholders in NTL are considering approaching the company with their own restructuring proposals unless their concerns are addressed soon.

NTL has so far resisted calls to shake up its capital structure. It plans to unveil a revised business plan next month, detailing cuts in capital spending aimed at improving cashflow. It has issued two statements in the past 10 days reiterating that it has no immediate liquidity problems.

A spokeswoman for NTL said the company 'went out of its way' to ensure that transactions between NTL and CoreComm 'were above board'. She said the deals were approved by independent directors.

CoreComm director Alan Patricof said: 'This is not a new situation. Barclay has held both jobs for six or seven years so it is not an issue.'

Knapp owns 1.4% of CoreComm and 0.4% of NTL. He was paid £84,000 by CoreComm last year and £352,000 by NTL.

Like NTL, CoreComm is in deep trouble and could be delisted as early as 2 January from Nasdaq despite a series of refinancings.