Telewest to begin restructuring talks

Telewest Communications revealed yesterday that its banks have agreed to allow the debt-laden cable group to press ahead with talks it says will almost certainly lead to a debt-for-equity swap.

The company's bank syndicate, owed £1.8bn, has allowed it to start formal talks with the owners of bonds with a face value of £3.6bn, triggering a lengthy discussion process that could drag on for months.

Its rival NTL has already swapped $11bn (£7bn) of bonds for new shares and expects to finish its recapitalisation by early October.

If Telewest follows suit, it will join a number of European telecoms companies exchanging huge piles of debt for shares, including Europe's largest cable group UPC and the telecoms equipment maker Marconi. Existing shareholders in such companies will be left with next to nothing.

"Telewest has secured the necessary waivers and consents from its bank group to permit it to enter into discussions with, among others, its bondholders concerning a possible reconstruction of its balance sheet," the company said.

The waiver was necessary because Telewest had been prevented from forging any deals with its bondholders that would damage the lenders' prospects of getting their money back.

The newly installed managing director Charles Burdick announced at the start of this month that Telewest would seek the waiver, saying: "We're moving down the steps to a debt-for-equity swap. It is becoming more and more likely."

Bankers said the fairly quick response to the request indicated their confidence in Telewest's recovery prospects, despite wider concerns about the cable sector.

"Revenue growth at a sufficiently high speed remains an issue for lenders. We need to see it growing fast enough to service the debt," one banker said. "Banks are happy that they'll get their cash back as long as the company can grow revenues fast enough."

The waiver is the first step in what is likely to be a drawn-out process, along the lines of NTL, which bankers see as a post-restructuring merger partner for Telewest.

Equity and credit analysts were generally unmoved by the waiver, which had been expected. "We'll have to wait until we get something solid in our hands," one analyst said.