Swiss hole

22 January 2003

A syndicate led by JP Morgan, Morgan Stanley and RBS won’t call in a huge loan to Cablecom, even though it clearly can’t support the debt. Why not? Either they cannot bear to book the loss or they cannot face up to an amazingly bad bubbleera lending decision.

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Lenders to Cablecom have ruled out a sale of the heavilyindebted Swiss cable operator, according to people familiar with the situation. The loan agreement governing Cablecom's E2.6bn facility, whose covenants its has apparently breached, allowed lenders to insist on a sale at any time from from 31 August 2002. But after exploratory talks with possible trade and private equity buyers, the lenders do not consider there is a prospect of getting an acceptable price for the company.

In March 2000, a banking syndicate led by Chase Manhattan (now JP Morgan Chase), Morgan Stanley, and Royal Bank of Scotland set up a CHF4.1bn (E2.8bn) loan facility for Cablecom, in connection with NTL's acquisition of the company. NTL bought Cablecom for CHF5.8bn (E3.9bn), from Swisscom AG, Siemens Schweiz AG and VE Telecom GmbH, refinancing the company's existing debts and establishing a new working capital facility. Cablecom has since become part of NTL Europe, thanks to the split of NTL's European assets from its UK and Irish business as part of the group's recent capital restructuring. According to NTL's Europe's initial SEC filing of 10 January 2003, the drawdown of the loan facility has been capped at E2.6bn.

NTL Europe, Cablecom, RBS and Morgan Stanley have declined to comment on the banks' intentions for Cablecom. JP Morgan did not return a call.

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