A group of bondholders has formed a committee that has hatched a plan to seize control of the restructuring negotiations surrounding financially distressed Dutch cable operator United Pan-Europe Communications, from its parent, UnitedGlobalCom (UGC), says a member of the committee. The bondholders, representing some $2.2 billion of $5.5 billion in outstanding high-yield bonds, formed the five-person committee last week. Early this week, the committee will appoint a financial advisor who will seek a strategic investor to pay down a E1 billion exchangeable loan held by UGC. The committee-member says he expects UGC to use the loan, along with its one-third share of UPC's bonds, to gain a disproportionate stake of the equity in a planned debt-for-equity swap. Eliminating the loan would shift the equity balance to the bond holders. The committee member says that if negotiations fail and UPC goes into receivership, a court-appointed trustee will allow the payment of the loan as it will be in the interest of the bondholders.
On Feb.1, UPC issued a press release announcing that it would miss scheduled E113 million in coupon payments due on three different bonds and was working to arrange a debt-for-equity swap to restructure the company. If UGC insists on going ahead with the swap outlined in the UPC press release, the bondholder committee will insist on receiving a "large majority" of the equity in the restructured company, says the committee member.
Several people close to the restructuring say Ben Renshaw, analyst at MacKay Shields, is leading the committee since the New York-based money manager is the largest UPC bondholder. Renshaw says MacKay Shields is involved in the restructuring negotiations, but that he is not the leader. He declines further comment. Other firms that are among the largest bondholders include Apollo Management,Everest Capital and Citigroup Asset Management, according to an official close to UPC. Beth Semmel, portfolio manager at Citigroup, did not return calls. Marko Dmitrijevic, president of Everest, and Steve Martinez, analyst at Apollo, declined comment. Jeffrey Saferstein, a partner at Paul, Weiss, Wharton & Garrison and legal advisor to the committee, would not name the firms on the steering committee. However, he says its genesis is a larger committee of 12 financial institutions, 11 of which hold over $100 million each in UPC bonds. The 12th holds over $50 million.
Last Tuesday, Saferstein organized a conference call open to all UPC bondholders. He says the purpose of the call was to gather all remaining bondholders and create the steering committee. He estimates that 40 bondholders were on the call, representing some $2.2 billion. He says it is premature to discuss any possible strategy, as the steering committee has not yet chosen a financial advisor. At its first conference call, held last Thursday, the committee drew up a list of four candidates, says the committee member. He declined to name the candidates.
Jim Milstein, an advisor to UPC at Lazard Freres' New York office, declined comment.