S&P cuts NTL credit rating to only one notch above default

Click to follow

The troubled cable company NTL suffered another major setback yesterday after Standard & Poor's branded the company with its lowest corporate credit rating.

The troubled cable company NTL suffered another major setback yesterday after Standard & Poor's branded the company with its lowest corporate credit rating.

The credit ratings agency cut the company's long-term corporate credit rating to "D" from "triple C minus" after NTL said it would not make a $96m (£67m) interest payment on certain of its bonds due at the start of this week.

NTL's decision not to make that interest payment put the company in technical default, although it still has a 30-day grace period within which to come up with the money.

"Although the terms of the notes include a 30-day grace period, Standard & Poor's believes that NTL will not meet the coupon payment by 1 May, 2002, which would equate to a default," said S&P director Leandro de Torres Zabala.

NTL, which is continuing to hold crisis talks over how to cut its £12bn debt pile, said on Monday the decision to avoid making the payment had been taken with the blessing of its bondholders. It also said its bank lenders continued to be "supportive" of its recapitalization plans, prompting speculation its financial re-engineering was nearing completion.

Furthermore, it said it had "sufficient" liquidity to make those interest payments, "given its existing liquidity" combined with the expected net proceeds of about $300m from the sale of its Australian broadcast group.

The S&P team, however, were downbeat yesterday on both the likelihood of NTL completing a restructuring before its cash runs out as well as on the prospects for bondholders.

"NTL's liquidity position and financial flexibility are also extremely weak and may be insufficient for the group to complete its planned recapitalization process by late 2002.

"Recovery prospects for bondholders are deemed very weak, given the security provided to bank lenders and the low valuations attributed to cable assets," S&P said.

Speculation is mounting that NTL could be considering filing for Chapter 11 bankruptcy in the US as a way to push through a restructuring that would almost certainly involve a debt-for-equity swap.

While the company warned last week it was running out of time to put a restructuring package together, chief executive Barclay Knapp has been far more upbeat on the likelihood of getting a deal done. He said last week "substantial and rapid" progress was being made on the company's recapitalisation and that the company was in the "back half" of the process.

The company is hoping to have its financial restructuring completed by the end of June but is also said to be in talks with potential investors including both Liberty and AOL Time Warner.

Last week, the company reported a net loss of $15.9bn for 2001 after accounting for $11.6bn of exceptional charges, mainly to cover the fall in value of acquisitions. A year previously it made a loss of $3bn.

Comments