Telewest's banks were yesterday threatening to block the company's proposed rescue restructuring - a move that could tip the cable company into administration - after a key bondholder demanded further changes to the plan.
The banks are said to be furious that Bill Huff, who runs a hedge fund bearing his name and who is thought to hold as much as 15 per cent of the company's bonds, is calling for the company to be moved to the US as a condition of the rescue deal.
A draft copy of the company's restructuring term sheet, obtained by The Independent, also shows that Mr Huff will be allowed to nominate two members of the restructured company's nine-strong board and will have a say in the appointment of a third director and also the company's chairman.
It also shows that Charles Burdick, Telewest's managing director, would stand to get a pay-off of £750,000 plus benefits - but no more than £863,738 - if his contract is terminated by the company on 30 days' notice.
The banks are thought to be threatening to refuse to sign such a rescue proposal unless the company and its primary share listing remains in the UK.
"The banks are now asking why should they agree to the company reincorporating in the US which may weaken their position in future if they're not getting anything in return?" a City source said.
He added: "Moving the company to the US would take it out of the City, take the dealings in the shares out from under the control of the Takeover Panel.... It's worrying because it makes it easier to put the whole company into a US bankruptcy proceeding."
The banks are, however, thought to be considering signing off a rescue deal if Mr Huff injects money that will go toward paying off a slug of the £2bn that they are owed.
Telewest has been trying to thrash out the rescue restructuring package with both its banks and its bondholders for more than a year. While the company keeps insisting a deal - which would see bondholders grab 98.5 per cent of the company in exchange for the cancellation of £3.5bn of debt - is in sight, an agreement has yet to be signed.
"There's just no progress to concluding this restructuring for a number of reasons," said one City source. "It's going nowhere at the present time."
Court documents in the shape of a recent witness statement by Mr Burdick, obtained by The Independent, also show that Mr Huff's business got a payment of $1.5m (£0.9m) on 5 August "relating to fees and expenses" incurred relating to the restructuring. The banks are surprised that Mr Huff has emerged with such a strong negotiating position in the company's rescue plan since he does not have a blocking vote on the deal.
Mr Burdick admits, in the court documents, that Mr Huff has been "unwilling to produce documentary evidence" of the size of his bond holding. The company believes, he says, that Mr Huff has at least 10 per cent but "probably" closer to 20 per cent of Telewest's bonds.
"That makes all this even more shocking that they [Telewest] have gone off and negotiated a deal with him [Mr Huff] because if he does only own between 10 and 20 per cent he was incapable of blocking the previous deal," said the source.
Mr Huff is said to have been the main opposer to the original restructuring plan on the table and the force that negotiated an even better deal for bondholders. Telewest confirmed in July that it expected shareholders would end up with just 1.5 per cent of the company's equity compared to 3 per cent previously.
For Telewest's restructuring to go ahead, it needs the backing of both the banks, who are owed about £2bn, and the bondholders. "Eventually, if you can't get the banks' agreement for what they want to do, the directors would probably have to put it into administration," the source said.Reuse content