NTL shares hurt by Moody's downgrade

NTL yesterday reacted with dismay to a move by the credit rating agency Moody's to reduce the status of the cable company's $20bn (£14bn) debt pile to near default status.

Shares in NTL plunged on the news, down 32 per cent to $2.01 by early afternoon, having fallen as low as $1.64 in early trade. Moody's said its downgrade was based on NTL's third-quarter results, which failed to meet its expectations.

The company reported earlier this month that losses hit $1.03bn in the quarter to 30 September, worse than the $770m loss for the period last year. It described this performance as "progress".

NTL, which has 2.9 million residential customers in the UK, estimated total 2001 revenues at £2.6bn.

The group said yesterday: "NTL notes with disappointment the action taken today by Moody's Investors Services.

"Internally, the company and its management have for some time been engaged in making adjustments to its business plan to reflect the current and anticipated business environment." NTL stressed that the downgrade was only on the back of publicly available information.

The company's debt already had high-yield or "junk" status. However, Moody's has 11 different junk ratings and the NTL debt was moved from a "B3" to a "Caa3" rating, which is just three notches above default.

Ted Barac, of Moody's, said: "The [new] rating reflects our heightened concerns over the company's ability to service its debt burden."

The agency pointed to "minimal" organic revenue growth in the third-quarter figures, and higher capital expenditure and one-off costs than expected – resulting in greater than anticipated cash burn. It said the company's position meant that it must deliver on extremely ambitious growth targets.

Mr Barac said: "Our rating implies that there is a higher degree of risk that the company may not be able to grow cashflow to a level required to support its debt."