Telewest has reached a preliminary restructuring agreement with its bondholders. As expected, the company is opting to go down the debt-for-equity restructuring route, with £3.5 billion worth of debt being cancelled and replaced with ordinary shares in the restructured company representing 97%. Following the restructuring current shareholders will own just 3% of Telewest’s issued ordinary share capital.
Charles Burdick, Telewest’s Managing Director, said that the agreement: …represents an important first step towards completing a financial restructuring that carefully balances the interests of all stakeholders. 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. All customers and suppliers should be reassured that Telewest will continue to meet its operational commitments.
Telewest’s senior secured credit facility, vendor financing, trade debt and other obligations, which make up the remainder of the company’s current debt, will be unaffected by this announcement. However, it is an important step in more than one way – the Board have reached agreement with an ad hoc bondholder committee, which was vying for control of the company against Liberty Media, which has previously expressed an interest in expanding its stake in Telewest by offering to purchase its debt. Additionally, the amount specified – £3.5 billion – goes a significant way into Telewest’s £5 billion+ total debt figure.
The company now intends to seek agreement with its other stakeholders. Also, it is deferring some interest payments until after the restructuring negotiations are complete. It should be noted that this agreement is non-binding and is subject to various conditions, including the reaching of an agreement between Telewest, the Bondholder Committee and Telewest’s senior lenders with respect to the detailed terms of the restructuring and the process for its implementation.