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Chapter 11 rumours spread

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ComputerWire: IT Industry Intelligence

NTL Inc, struggling to restructure a $17bn debt mountain, said yesterday it will not make interest payments due yesterday on a number of US-traded high-yield bonds, as speculation that the company is set to file for Chapter 11 bankruptcy protection continues to mount.

The company, which is based in New York but which has most of its operating businesses in the UK and elsewhere in Europe, also said it will miss deadline for its annual report with the US Securities and Exchange Commission. NTL said its auditors' resources have been "severely" stretched by ongoing debt restructuring talks, according to reports.

While NTL would not comment on reports that it will file for Chapter 11 bankruptcy protection, the pattern of recent financial disclosures follows the disturbing precedent set by the many ISPs that have gone into Chapter 11 restructuring over the last 18 months.

Auditors Ernst & Young, preparing the SEC report, are to include a paragraph questioning NTL's viability as a going concern, the company said last week. On Thursday, the company was delisted from the New York Stock Exchange for non-compliance with minimum bid price rules, and now trades over the counter.

The company said it has "sufficient liquidity" to make the April 1 payments, but will default at the request of bondholders. The sale of its Australian business, expected to close today, will net the firm about $300m. The company did not disclose the size of the defaulted payments, but reports put it at about $96m.

NTL said it was advised by a group of bondholders to not make the payments on three groups of senior notes issued by subsidiary NTL Communications Corp. The company has a 30-day grace period to decide whether to make the payments.

"The decision not to make interest payments at this time was made at the request of an unofficial committee of the company's bondholders," the company said in a statement. It added that the committee has "indicated they are representing the holders of approximately 50% of the face value" of the outstanding bonds.

As NTL undertakes the massively complex restructuring of its debt, a strategic investment by a rival cable company is being widely touted. Last week Liberty Media Corp confirmed talks are going on about a relationship. Liberty owns 25% of fellow UK cable operator Telewest Communications Plc, and has well-documented ambitions in Europe. AOL Time Warner Inc is also being touted as a potential investor.

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