NTL WAS always likely to escape. Britain's biggest cable TV andcommunications group was simply too large and owed its lenders fartoo much, at GBP 12 billion, to be pushed into oblivion. It probablyhas too much potential, too. The real question was how it wouldwriggle out of the coffin.
Yesterday's deal with its leading bondholders provides most of theanswer: a massive GBP 7.5 billion slug of its debt will beeffectively written off and swapped for shares in the company, givingit a fresh start. Meanwhile, its shareholders have been hung out todry.
NTL's shares, listed in the US rather than London, had alreadysunk from around $38 in 2001 (after enjoying a brief sojourn over$100 at one mad, heady moment in early 2000) to just seven cents.
Now, thanks to the massive issue of new shares that is heading thebondholders' way, shareholders' stakes in NTL will be diluted down tovirtually nothing, although they get rights and warrants entitlingthem to buy back into the group in the next few years.
None of this will happen before NTL has filed for Chapter 11bankruptcy protection in the US, making it just the latest in aseries of TV and telecoms companies to go into administration.
It will also need formal approval from the 33 per cent ofbondholders and 60 banks not involved in the discussions.
The deal gives NTL the dubious honour of having defaulted oninterest payments due on a world record quantity of bonds - its $10.6billion outstrips Enron, which failed to cough up on $9.9 billionworth.
So how did NTL get into this mess?
For the answers, the clock must be wound back as far as 1981, whenNTL's American chief executive, maths graduate Barclay Knapp, took ajob in Ohio with a mobile phones firm owned by George Blumenthal, nowNTL's chairman.
The sale of this business, Cellular Communications, to Airtouchfor $2.5 billion in 1996, provided some of the cash to build NTL inthe UK.
Starting with failed cable franchises they had earlier picked uptheir company, then called International CableTel, launched abusiness offering phone calls bundled in with relatively cheap pay-TV.
One of the first franchises bought, in 1994, was Clyde CableVision business which gave them the Glasgow franchise, now comprising180,000 customers and which has raised its profile by even handedly -and sensibly - sponsoring football shirts for both Rangers andCeltic.
Knapp and Blumenthal then snapped up National Transcommunicationsfor GBP 235 million, and the bandwagon was rolling.
Cash flow from National Transcommunications helped finance theroll-out of their UK cable operation, renamed NTL, and a torrent ofacquisitions began in 1997.
The shopping list included Comcast UK, ComTel and Diamond Cable,with the biggest being Cable & Wireless Communications, bought forGBP 8 billion right at the peak of technology stock mania in 2000.That was when Knapp acquired his title as the King of Cable.
NTL also bought in Europe, and together with its affiliatecompanies now has operations in France, Switzerland, Germany andSweden.
By now, the offering had been expanded to include broadband, highspeed internet access.
But in the spring of 2000, the dotcom bubble burst, technology andtelecoms stocks were pulverised, and NTL, once worth $40 billion, waseffectively down to about $20 million at a share price of sevencents.
NTL, whose shares are listed in New York, clearly overpaid formany of its acquisitions by a vast amount.
But at the time, as Ian Jeffers, managing director for NTL'soperations in Scotland, Wales and Northern Ireland said: "It was acase of eat or be eaten.
"If we hadn't bought those franchises somebody else would havedone and we were just paying market rates."
Shareholders in NTL might take a different view, including pensionfund managers such as AXA, with about 8 per cent of the company andMerrill Lynch with 3.3 per cent, as well as telecoms group Cable &Wireless, which owns 11.2 per cent and France Telecom, the largestexisting shareholder with 18 per cent.
Apart from the shareholders, bondholders have also taken theirshare of pain , with the value of their bonds dropping to well belowhalf their original face worth.
Additionally, the 60 lending banks are owed almost $6 billion, thebiggest of which are JP Morgan, Bank of America and Morgan Stanley.
Most observers argue that the logical way forward for NTL, whichhas 1.25 million customers across the UK, would be to merge with itsbig UK cable rival Telewest, with 750,000.
That could create a business that could become a credible rival toRupert Murdoch's satellite operator BSkyB, which has six millioncustomers so far.
The likelihood seems to be that as soon as NTL is properlyrecapitalised, a takeover bid will come in, with the favourite beingLiberty Media, the US cable giant chaired by John Malone, whichalready has a 25 per cent stake in Telewest.
For now, one of the biggest challenges for management will be tostabilise the business on the ground.
It has been forced into massive cost cutting, with staff numberscoming down drastically from 22,000 to just 13,000 in a short time.Inevitably, this has impacted on customer service.
NTL's churn rate, or the number of customers who refuse to renewtheir subscriptions or cancel, stood in the third quarter of 2001 at20 per cent, double the level seen at BSkyB.
Dissatisfaction has manifested itself in the setting up of protestwebsites such as nthellworld.com. But the chief executive may nothave too much longer to suffer.
Analysts reckon once the restructuring is complete, he will go.
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