NTL is a month away from becoming the biggest corporate bond defaulter after skipping interest payme...
NTL is a month away from becoming the biggest corporate bond defaulter after skipping interest payments on $1.3bn of debt.
The UK based cable-television company, which is currently seeking to persuade creditors to forsake some of the $17.5bn they are owed, would surpass Enron Corporation's $9.9bn default if it fails to make payments on $11.5bn of bonds.
NTL, whose shareholders include France Telecom, Microsoft and Verizon Communications, last week withheld some $74.2m in interest at the request of bondholders, who own about half of the company's junk-rated debt. It has 30 days to make the payment.
'It won't pay the interest in the grace period, which will trigger cross defaults with other bonds and the bank debt, sending it into Chapter 11,' said Aengus McMahon, who helps manage around E900m in high-yield debt at Henderson Investors. McMahon has sold his NTL bonds.
NTL chief executive officer Barclay Knapp has let go 8,800 workers, cut spending, frozen managers' pay, sold assets and stopped seeking new customers in a bid to stave off collapse.
Debt spiraled following an $18bn, two-year spending spree and after Knapp continued building networks even as demand for phone, TV and internet services waned.
Angelo, Gordon & Co, Franklin Resources, Huff & Co and Appaloosa Investment are members of an unofficial bondholders committee proposing to swap debt for ownership of NTL. An agreement with bondholders is expected within weeks.
Knapp is also in talks with John Malone, who controls US cable-TV operator Liberty Media, about taking a stake in the company in return for cutting debt.
NTL, which said it will pay about $19m in interest on a $285m debt issue of its Diamond Cable Communications unit, may also have to make a bonus payment to Diamond Holdings bondholders or face a further default.
NTL breached Diamond Holdings bond covenants by failing to provide independent audits for £53.9m of charges for 'management, financial, legal and technical services' in the nine months to 31 September 2001, up from £19m in the same period in 2000, according to the unit's US Securities & Exchange Commission.
Diamond Holdings has £135m and $110m of bonds outstanding. The dollar-denominated, 9.125% senior notes due in 2008 are trading at 78% of face value. Investors are threatening to force NTL to redeem the bonds unless they receive an additional 6% to 10%.
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