Showdown looming at Telewest

12 April 2012

BONDHOLDERS in ailing cable TV company Telewest are challenging attempts by US media mogul John Malone to strengthen his grip on the business. A group of bondholders has approached Telewest about a debt-restructuring under which they would take control. Liberty Media, which holds 25% of Telewest, has offered to buy a chunk of the bonds - a deal that would give him more say should Telewest pursue a debt-for-equity swap.

But the group, representing the majority of bondholders, said it was sceptical Malone's offer would 'facilitate a restructuring or other resolution of Telewest's debt problems in the best interests of bondholders as a whole'. Malone has offered to buy 20% of the bonds, at between 32p and 45p in the pound of their face value.

Telewest said there was nothing to talk about at the moment. 'We're happy to talk to bondholders. We talk to bondholders all the time,' a spokesman said. 'But we have nothing new to discuss with them or anybody representing them.'

Telewest shares dropped 16% to a new low of 3.15p. The stock, down from more than 50p in January, has lost more than a third of its value in the past five days as shareholders increasingly fear a highly dilutive debt swap. Telewest, which piled up £5.3bn in debts through acquisitions at the height of the tech and telecoms boom, says its will press ahead and seek alternatives to a debt restructuring. These include sales of assets like Flextech, a TV production company. Telewest started cutting 1,500 jobs last month to save £50m a year.

Malone's offer is unlikely to draw much interest from distressed asset funds, who have been snapping up bonds in anticipation of a debt swap. But analysts say it could offer a good way out for investors wanting to cut their losses. 'Most of the people who are holding Telewest bonds now want to be equitised,' said Peter Harvey, a fund manager at F&C in London. 'They want to hold shares.'

Malone, long seen as a cable consolidator in Europe, already has a controlling stake in the continent's largest cable group United Pan-Europe Communications. He bought UPC bonds in advance of a debt for equity swap at UPC - a move which analysts say he has mirrored with the Telewest offer.

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