UPC restructures debt

By Susan Rush
From The September 30, 2002 Edition Of CED Broadband Direct

European cable network operator United Pan-Europe Communications NV has reached an agreement with its creditors to restructure its debt. The deal will give its parent UnitedGlobalCom a minimum 65.5 percent interest in the company.

The recapitalization plan calls the elimination of 65 percent of UPC's debt. The company has $10.5 billion in debt. The company's debt stems from buying up European cable networks.

Once the plan is complete, UPC will have an equity value of $1.87 billion. UGC has agreed to underwrite up to $98.7 million in additional funding to UPC, through the issuance of new stock once the plan is completed.

The restructured UPC will offer each holder of UPC notes and Belmarken notes the right to purchase a pro rated share of up to $98.7 million of additional shares of new UPC common stock.

The plan will give UPC sufficient resources to fund its operations through to positive free cash flow without the need for additional capital, according to UGC president and chief operating officer Mike Fries. Fries did not elaborate on when the company would reach positive free cash flow. Liberty Media Corp. owns a 72 percent stake in UGC. At the end of June, UGC's networks reached 19.1 million homes.

In hopes of carrying out the plan smoothly, UPC has agreed to voluntarily file for Chapter 11 bankruptcy protection. UPC expects to complete the recapitalization of its balance sheet by the end of the first quarter 2003.