Telewest falls after Liberty offer

John Malone: Looking to expand his cable empire in Europe

LONDON, England -- Telewest Communications fell almost six percent on Thursday after a unit of Liberty Media offered to buy $4.2 billion worth of the UK cable group's bonds.

Liberty, the U.S. based media investment group run by John Malone, already has a 25 percent stake in Telewest. The offer by Liberty TWSTY Bonds, if accepted, could give Malone's group more control of Telewest if the cable operator opts for a debt-for-equity swap.

Telewest has a debt of £5.3 billion pounds ($7.8 billion) built up during an acquisition spree over the past three years.

Earlier this year, rival UK cable operator NTL reached agreement with its bondholders on a debt-for-equity swap, totalling about $10.6 billion. NTL, which is $17 billion in debt, also received a cash injection of $500 million.

Telewest (TWT) shares have fallen from 50 pence in January to 4.68 pence in midday London trading on Thursday, down 5.6 percent on the session. Its stock has been driven lower by concern that shareholders would have a much smaller stake in the company if a debt-for-equity swap goes ahead.

Liberty TWSTY has offered to initially buy about 20 percent of Telewest's bonds, worth $850 million. It could extend the offer to $4.2 billion for all the group's bonds.

"This move would imply to us that Liberty intends to position itself to have a significant role in any restructuring process which may include a debt-for-equity swap,'' Prudential Financial said in a research note.

In November, Liberty bought $1.37 billion in bonds issued by United Pan-Europe Communications, continental Europe's largest cable company, which gave it control of 30 percent of UPC's debt.

Liberty currently has a 25 percent stake in Telewest, which offers cable services to more than 1.7 million homes.

Malone's group had bid for six regional cable television companies in Germany owned by Deutsche Telekom, but that deal was shelved after Liberty refused to go along with conditions laid down by government regulators.