NTL files for $17bn bankruptcy

NEW YORK/LONDON, May 8 (Reuters) - NTL Inc, Britain's leading cable TV group, filed on Wednesday for one of the largest U.S. bankruptcies, in a humbling but necessary step in its half-year road to financial recovery.

NTL and several holding companies filed for protection from creditors in a Manhattan bankruptcy court, court filings show, as part of the company's plan to swap $10.6 billion of bond debt for a controlling equity stake. NTL said its operations will continue as usual.

NTL, whose businesses are in Europe but which is based in New York, piled up debt in an acquisition spree at the height of the 1990s technology boom. The resulting interest payments have threatened what analysts consider to be a viable business. NTL has 2.8 million subscribers.

"This is effectively the formalities of the recapitalization process starting, and the restructuring beginning in earnest," said Chavan Bhogaita, a telecommunications bond analyst at Bear Stearns in London.

Only seven public companies have had larger U.S. bankruptcies, as measured by pre-petition assets, according to BankruptcyData.com. The largest was Enron, which had $63.4 billion, BankruptcyData.com said.

NTL listed $16.8 billion of total assets and $23.4 billion of total debts in filing for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The company's debt includes bonds being swapped, nearly $6 billion of bank loans and $5.8 billion in preference shares.

NTL shares closed Wednesday on the over-the-counter bulletin board at 11.5 cents, down 0.5 cents, valuing the one-time multi-billion dollar group at just $33 million.

The shares reached a peak of $136 in January 2000. Several shareholders have filed class action lawsuits against the company, alleging that management misled them.

Traders said NTL's 12.375 percent euro bonds due 2008 were bid after the filing unchanged at 36 cents on the dollar. The traders said the bonds should remain near that level until the debt-for-equity swap is completed.

Record bond default

NTL already has clearance from the majority of its bondholders, lending banks and shareholders to push ahead with what is effectively a record $10.6 billion corporate bond default, which tops even that of bankrupt U.S. energy trader Enron Corp.

NTL expects to complete its debt restructuring, which is backed by its largest shareholder, France Telecom (PFTE), by around September.

NTL's filing is about the same size as that of retailer Kmart Corp. (KM), which had $17 billion of assets when it sought court protection in January, BankruptcyData.com said.

The NTL entities that sought protection from creditors also include NTL (Delaware) Inc., NTL Communications Corp., Communications Cable Funding Corp., Diamond Cable Communications Ltd. and Diamond Holdings Ltd., NTL Inc.'s filing shows. The company also said the two Diamond units will also file for administration in Great Britain.

Under the recapitalization, NTL will still be responsible for $4.5 billion of bank loans, $800 million of bonds for its Diamond and Triangle units, and $500 million of new capital injected by bondholders. NTL shares would be relisted on the New York Stock Exchange or the London Stock Exchange.

The company will be split into its core British and Irish operations and Euroco, including non-core continental European assets such as Cablecom, which it failed to sell last year. Bondholders will own the core British and Irish businesses and 86.5 percent of Euroco.

Creditors

NTL's main creditors include the ITN News Channel and The Studio, TV channels respectively set up with London-based news group ITN and media giant Vivendi Universal (PEX), and Macquarie Communications -- the division of the bank which bought NTL's Australian broadcasting assets.

Shares of the other large British cable TV provider, Telewest Communications Plc (TWT), have swooned on fear it may also need to rework its debt, which in March topped six billion pounds ($8.7 billion), Moody's Investors Service said.

Europe's largest cable TV provider, the struggling Netherlands-based United Pan-Europe Communications, is also pursuing a multi-billion-dollar debt swap.

John Malone and his U.S. cable group Liberty Media Corp. are expected to be lurking, waiting to take over distressed companies and build a European cable empire.