The troubled cable firm NTL gave a $15m (£10m) lifeline to a struggling US telecoms firm run by NTL's founder and chief executive, despite facing its own financial problems, it has emerged.
NTL went to the rescue of CoreComm, which provides local and long-distance phoneservices, last April, paying it $15m for unsecured convertible loan stock as part of CoreComm's $80m fundraising.
CoreComm shares its chairman, George Blumenthal, chief executive, Barclay Knapp, and three directors with NTL, as well as a Manhattan office block.
Details of the cash injection come as NTL, which has £12bn of debt, faces investor calls for a major restructuring to avert financial collapse.
NTL said the payment to CoreComm was part of an agreement to enable its British internet traffic to access an American network. It followed investments of $16m from Messrs Blumenthal and Knapp. However, the payments failed to fill CoreComm's funding gap. Last week, the US telecoms operator agreed a debt-for-equity swap that saw bondholders and preference shareholders acquire 87 per cent of CoreComm in return for cancelling $600m of debt.
NTL's five independent directors concluded that the deal was "inherently fair" and that CoreComm made a better partner than a third party, but NTL is believed to have paid more than it would have on the open market.
NTL is expected to provide details of a new business plan in early 2002 after coming under increasing pressure to reduce its debt. The cable company was last week again forced to issue a statement reassuring the market that it had no immediate liquidity concerns. NTL said it remained fully funded, up to the point where it became cash-flow positive at the end of 2003. It is in talks to sell NTL Broadcast, its towers and transmission division, which analysts estimate could fetch anything between £1bn and £2bn.
However, Credit Suisse First Boston has estimated that NTL needed to raise around $750m to reach cash-flow positive in 2005. The bank has calculated that the company had enough cash only to take it into 2003.
British and European bondholders in NTL are considering approaching the company with their own restructuring proposals and have appointed Cadwalader, Wickersham and Taft, a law firm, to represent them.
NTL last week axed a further 2,000 jobs, reducing the company's total workforce from 21,000 at the start of 2001 to 13,000.Reuse content