Telewest shareholders left with 1.5 per cent of equity

The financially troubled cable group Telewest, confirmed yesterday that shareholders would end up owning even less of the company than originally expected after bondholders forced changes to the terms of the company's rescue restructuring.

While the refinancing talks are still continuing, Telewest said it now expected shareholders would end up with just 1.5 per cent of Telewest's equity as part of the deal.

That is half the amount shareholders had hoped for after the company signalled, in a preliminary restructuring agreement last autumn, that bondholders were set to get 97 per cent of the equity in return for axing £3.5bn of debt.

Bill Huff, who runs a hedge fund bearing his name and who is thought to hold as much as 15 per cent of the bonds, is said to have been the main opponent of the initial deal.

One source said: "Bondholders in general and Huff in particular were saying that shareholders shouldn't get anything, which is normal tactics in this sort of a process. The Telewest board have not been a pushover.... Shareholders are still getting something, although it was never going to be a huge amount, which is good considering Telewest is not in the strongest negotiating position."

The cable group's restructuring process, which initially began last summer and which has been worked on ever since, is not expected to get signed off for another couple of months.

"They're close to the end of agreeing what will eventually be filed," said the source, who added: "It will take up to a couple of months before they actually get to the filing." Shares in Telewest rose from 1.62p to close at 1.65p.

Once the restructuring deal is done, control of the company will be handed over to bondholders, which include Fidelity Management and Capital Research.

Its US-listed rival NTL had to undergo a similar process that was completed earlier this year. That cable company, headed by Barclay Knapp, emerged from Chapter 11 bankruptcy protection on 10 January after engineering an $11bn (£7bn) restructuring.

Once Telewest has completed its restructuring, the pair are widely expected to join forces. At Telewest's annual meeting last month, the chairman Cob Stenham hinted at the possibility of such a deal. "That [a merger] has clearly been much discussed and much speculated about in the press.... There's a significant chance of that happening at some point in the future," he said.

Telewest, which is headed by Charles Burdick, is due to report second-quarter figures on Thursday. In the first quarter, the company's losses widened to £186m from £167m a year ago.

While the latest twist is a blow for shareholders, it will not come as too great a shock since Telewest warned last month that bondholders were demanding last-minute changes to the terms of the planned debt-for-equity swap.