Ailing NTL thrown £7.5bn lifeline

NTL, the cable company that almost collapsed beneath £12.5bn of debt earlier this year, has been thrown a lifeline by a group of bondholders, headed by some of the biggest fund managers in America.

The bondholders have agreed to convert their debt, worth £7.5bn, into shares - allowing them to take over 100% of NTL in Britain and Ireland and 87% of NTL in continental Europe. Under the complex refinancing, NTL's £5bn of bank debt will remain unchanged.

France Télécom, which has 18% of the company, and other shareholders will be offered warrants and rights allowing them to buy back into the group over the next eight years.

The refinancing has been negotiated with institutions owning about two thirds of NTL bonds. The remaining 33% of investors and all NTL's banks have yet to agree to the deal. Chief executive Barclay Knapp is hopeful that they will. 'This agreement resuscitates the company and ensures that we can continue on a business-as-usual basis. We can see the light at the end of the tunnel,' he said.

Knapp and other directors will all remain in place until the refinancing is completed, possibly in August or September of this year. Knapp, who has been blamed by some for the company's financial woes, could not say if he will keep his job once the deal has been signed. 'My main job is to get this new funding in place. If we do a great job of that, there should be a future for all of us,' he said.

The refinancing is expected to save NTL more than $800m (£556.5m) in annual interest payments. Bond investors have also agreed to provide $500m of new money.

The company said its 3m cable customers will not see any alteration to their service and that agreements with suppliers will also remain unaffected.

NTL will now file for Chapter 11 bankruptcy protection in the US, a move that allows it to compel dissident lenders to accept its recapitalisation proposals if two-thirds of creditors by value or 50% by number agree to the scheme.

The company could struggle to persuade banks to accept the deal, and some of them have already expressed reservations. Smaller bondholders may also be reluctant to sign up to it. In the meantime, the unofficial committee of bondholders with whom NTL has been negotiating, has told the company not to pay interest due on Monday on certain bonds.

The cable group has been advised by CSFB, JP Morgan and Morgan Stanley.