Bondholders set to control Telewest

The cable group Telewest Communications yesterday inched closer to signing a long-awaited financial restructuring package that will see bondholders seize control of the business.

Existing shareholders, which include Liberty Media and the US software giant Microsoft, could end up with 3 per cent of the company's equity. Bondholders will own 97 per cent after agreeing in principle to swap £3.5bn of debt into shares.

The deal still needs approval from other stakeholders, including Telewest's banks, and a final agreement could take weeks to materialise. Its total debt amounts to about£5.3bn.

Charles Burdick, Telewest's managing director, described the move as "an important first step" along the road towards completing a financial restructuring. "I am confident we will be able to conclude a final agreement that will put the company on a sound financial footing, allowing us to build on our operational strength and extend our leadership in the broadband market," he said.

Telewest will defer making a £69m interest payment, due today, on some of its bonds. The company now has 30- days grace to make the payment before it is in default.

Despite the financial upheaval, Mr Burdick stressed it was business as usual as the restructuring talks continued. "All customers and suppliers should be reassured that Telewest will continue to meet its operational commitments," he said.

The deal will see Telewest join a growing list of companies, including telecoms equipment maker Marconi, forced to carry out refinancings that have left shareholders practically empty-handed.

Telewest will also be following in the footsteps of rival cable business NTL. That business filed for Chapter 11 bankruptcy protection in the US earlier this year as part of a financial restructuring which will see nearly $11bn of debt turned into equity. Analysts have long predicted that NTL and Telewest will join forces once they have both emerged from their respective restructurings.

Separately, the Dutch cable company United Pan-Europe Communications also unveiled a debt-for-equity swap and said it would file for bankruptcy protection as part of the rescue refinancing.