<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
NTL INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 4899 52-1822078
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
OFINCORPORATION OR CODE NUMBER)
ORGANIZATION)
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
(212) 906-8440
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
RICHARD J. LUBASCH, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
NTL INCORPORATED
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
(212) 906-8440
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
ROBERT M. CHILSTROM, ESQ.
THOMAS H. KENNEDY, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
----------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
----------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT PRICE(1)(2) FEE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/2% Series B Senior
Notes Due 2008........ (Pounds)125,000,000 99.670% (Pounds)124,587,500 $60,220.30
- --------------------------------------------------------------------------------------------
10 3/4% Series B Senior
Deferred Coupon Notes
Due 2008.............. (Pounds)300,000,000 58.670% (Pounds)176,010,000 $85,075.75
- --------------------------------------------------------------------------------------------
9 3/4% Series B Senior
Deferred Coupon Notes
Due 2008.............. $1,300,000,000 61.724% $802,412,000 $236,711.54
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Determined solely for the purpose of calculating the registration fee.
(2) Calculation based on an exchange rate of US$1.00=(Pounds)1.6385 being the
noon buying rate on June 3, 1998.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THIS PROSPECTUS SHALL NOT CONSTITUTE AN +
+OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY +
+SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, +
+SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION +
+UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, PRELIMINARY
PROSPECTUS DATED JUNE 5, 1998
PROSPECTUS [LOGO OF NTL
INCORPORATED]
OFFER FOR ALL OUTSTANDING
9 1/2% SENIOR NOTES DUE 2008 IN EXCHANGE FOR
9 1/2% SERIES B SENIOR NOTES DUE 2008
AND
10 3/4% SENIOR DEFERRED COUPON NOTES DUE 2008 IN EXCHANGE FOR
10 3/4 SERIES B SENIOR DEFERRED COUPON NOTES DUE 2008
AND
9 3/4% SENIOR DEFERRED COUPON NOTES DUE 2008 IN EXCHANGE FOR
9 3/4% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2008,
WHICH HAVE, IN EACH CASE, BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OF
NTL INCORPORATED
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON , 1998,
UNLESS EXTENDED
NTL Incorporated, a Delaware corporation (the "Company"), hereby offers, upon
the terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange (i) an aggregate principal amount of up to
(Pounds)125,000,000 9 1/2% Series B Senior Notes Due 2008 of the Company (the
"New Sterling Senior Notes"), for a like principal amount of the issued and
outstanding 9 1/2% Senior Notes Due 2008 of the Company (the "Old Sterling
Senior Notes" and, together with the New Sterling Senior Notes, the "Sterling
Senior Notes"), (ii) an aggregate principal amount at maturity of up to
(Pounds)300,000,000 10 3/4% Series B Senior Deferred Coupon Notes Due 2008 of
the Company (the "New Sterling Deferred Coupon Notes"), for a like principal
amount at maturity of the issued and outstanding 10 3/4% Senior Deferred Coupon
Notes Due 2008 of the Company (the "Old Sterling Deferred Coupon Notes" and,
together with the New Sterling Deferred Coupon Notes, the "Sterling Deferred
Coupon Notes"), and (iii) an aggregate principal amount at maturity of up to
$1,300,000,000 9 3/4% Series B Senior Deferred Coupon Notes Due 2008 of the
Company (the "New USD Deferred Coupon Notes", and together with the New
Sterling Senior Notes and the New Sterling Deferred Coupon Notes, the "New
Notes"), for a like principal amount at maturity of the issued and outstanding
9 3/4% Senior Deferred Coupon Notes Due 2008 (the "Old USD Deferred Coupon
Notes", and, together with the New USD Deferred Coupon Notes, the "USD Deferred
Coupon Notes" and, together with the Old Sterling Senior Notes and the Old
Sterling Deferred Coupon Notes, the "Old Notes" and, the Old Notes, together
with the New Notes, the "Notes"), in each case, from the respective holders
thereof (the "Holders"). The terms of the New Notes are identical in all
material respects to the Old Notes except for certain transfer restrictions and
registration rights relating to the Old Notes and except for certain provisions
providing for special interest on the Old Notes under certain circumstances
relating to the timing of the Exchange Offer.
On March 13, 1998 the Company issued (Pounds)125,000,000 aggregate principal
amount of Old Sterling Senior Notes, (Pounds)300,000,000 aggregate principal
amount at maturity of Old Sterling Deferred Coupon Notes, and $1,300,000,000
aggregate principal amount at maturity of Old USD Deferred Coupon Notes. The
Old Notes were issued pursuant to an offering exempt from registration under
the Securities Act of 1933, as amended (the "Securities Act") and applicable
state securities laws.
The Old Notes are, and the New Notes will be, senior unsecured obligations of
the Company, ranking pari passu in right of payment of principal, premium, if
any, and interest with all other existing and future unsubordinated obligations
of the Company and ranking senior to all other existing and future subordinated
debt of the Company. The Company is a holding company and, therefore, the Old
Notes are, and the New Notes will be, effectively subordinated to all existing
and future indebtedness and other liabilities and commitments of the Company's
subsidiaries with respect to the cash flow and assets of those subsidiaries. As
of March 31, 1998, such subsidiaries had approximately $342 million
((Pounds)205 million) of total liabilities.
The New Sterling Senior Notes will bear interest from the most recent date to
which interest has been paid on the Old Sterling Senior Notes or, if no
interest has been paid on the Old Sterling Senior Notes, from March 13, 1998.
Accordingly, if the relevant record date for interest payment occurs after the
consummation of the Exchange Offer, registered holders of New Sterling Senior
Notes on such record date will receive interest accruing from the most recent
date to which interest has been paid or, if no interest has been paid, from
March 13, 1998. If, however, the relevant record date for interest payment
occurs prior to the consummation of the Exchange Offer, registered holders of
Old Sterling Senior Notes on such record date will receive interest accruing
from the most recent date to which interest has been paid or, if no interest
has been paid,
(continued on page 2)
SEE "RISK FACTORS" ON PAGE 18 OF THIS PROSPECTUS FOR A DESCRIPTION OF CERTAIN
RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE
OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE>
(continued from front cover page)
from March 13, 1998. Old Sterling Senior Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the
Exchange Offer, except as set forth in the immediately preceding sentence.
Holders of Old Sterling Senior Notes whose Old Sterling Senior Notes are
accepted for exchange will not receive any payment in respect of interest on
such Old Sterling Senior Notes otherwise payable on any interest payment date
the record date for which occurs on or after consummation of the Exchange
Offer. The Old Sterling Deferred Coupon Notes and the Old USD Deferred Coupon
Notes were issued at a substantial discount from their principal amount at
maturity. Cash interest will not accrue on the New Sterling Deferred Coupon
Notes and the New USD Deferred Coupon Notes prior to April 1, 2003. Commencing
April 1, 2003, interest on the New Sterling Deferred Coupon Notes and the New
USD Deferred Coupon Notes will accrue at rates of 10.75% and 9.75%,
respectively, and will be payable semiannually in arrears on each April 1 and
October 1, commencing October 1, 2003. Original issue discount on the New
Sterling Deferred Coupon Notes and the New USD Deferred Coupon Notes will
accrue from March 13, 1998, the date of original issuance of the Old Sterling
Deferred Coupon Notes and the Old USD Deferred Coupon Notes, respectively.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreements (as
defined). Based on interpretations of the staff of the Securities and Exchange
Commission (the "Commission"), as set forth in no-action letters issued to
third parties, the Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes may be offered for resale, resold
and otherwise transferred by Holders thereof (other than any such Holder which
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such Holders' business and such Holders
have no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of such New Notes. The
Company acknowledges and each Holder, other than a broker-dealer, must
acknowledge that it is not engaged in, does not intend to engage in, and has
no arrangement or understanding with any person to participate in the
distribution of New Notes. If any Holder is an affiliate of the Company, is
engaged in or intends to engage in or has any arrangement or understanding
with any person to participate in the distribution of the New Notes to be
acquired pursuant to the Exchange Offer, such Holder (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction. Each broker-dealer who holds
Old Notes acquired for its own account as a result of market-making activities
or other trading activities, and who receives New Notes in exchange for such
Old Notes pursuant to the Exchange Offer, may be an "underwriter" within the
meaning of the Securities Act and must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes received in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date (as
defined) and ending at the close of business on the 180th day following the
Expiration Date it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all of the expenses incident to the Exchange Offer. Tenders
of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date. If the Company terminates the Exchange Offer and does
not accept for exchange any Old Notes, the Company will promptly return Old
Notes to the Holders thereof. See "The Exchange Offer."
The Old Notes are eligible for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market and are listed on the
Luxembourg Stock Exchange. Prior to this Exchange Offer, there has been no
public market for the New Notes. Although the Initial Purchasers (as defined)
have informed the Company that they intend to make a market in the New Notes,
they are not obligated to do so and any such market-making may be discontinued
at any time without notice. If a market for the New Notes should develop, the
New Notes could trade at a discount from their principal amount or Accreted
Value (as defined), as the case may be. The Company does not currently intend
to list the New Notes on any securities exchange (other than the Luxembourg
Stock Exchange) or to seek approval for quotations through any automated
quotation systems. There can be no assurance that a market for the New Notes
will develop.
2
<PAGE>
UNTIL 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) DEALERS
AFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN THE
EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS OBLIGATION IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
AVAILABLE INFORMATION
The Company is currently subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, information statements
and other information with the Commission. Any reports, proxy statements,
information statements and other information filed by the Company with the
Commission may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located
at Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661 and 13th Floor, Seven World Trade Center, New York, New York
10048, and copies of such material may also be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission also maintains a site on the World
Wide Web, the address of which is http://www.sec.gov, that contains reports,
proxy and information statements and other information regarding issuers, such
as the Company, that file electronically with the Commission. Such reports,
proxy statements and other information concerning the Company may also be
inspected at the offices of the Nasdaq Stock Market, Reports Section, at 1735 K
Street, Washington, D.C. 20006. As long as the New Notes are listed on the
Luxembourg Stock Exchange, copies of such reports, proxy statements and other
information will also be made available free of charge at the specified office
of the Company's agent in Luxembourg, Banque Internationale a Luxembourg S.A.
(the "Luxembourg Agent").
The Company has filed with the Commission a Registration Statement on Form S-
4 (herein together with all amendments and exhibits thereto, called the
"Registration Statement") under the Securities Act with respect to the notes
offered by this Prospectus. This Prospectus does not contain all of the
information set forth or incorporated by reference in the Registration
Statement and the exhibits and schedules relating thereto, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the notes
offered by this Prospectus, reference is made to the Registration Statement and
the exhibits filed or incorporated as a part thereof, which are on file at the
offices of the Commission and may be obtained upon payment of the fee
prescribed by the Commission, or may be examined without charge at the offices
of the Commission. Copies of the documents which are exhibits to, or
incorporated as part of, the Registration Statement, will be made available
free of charge at the specified office of the Luxembourg Agent. Statements
contained in this Prospectus as to the contents of any documents referred to
are not necessarily complete, and, in each such instance, are qualified in all
respects by reference to the applicable documents filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference into this Prospectus:
(a) the Company's Annual Report on Form 10-K for the year ended December
31, 1997, dated March 30, 1998;
(b) the Company's Quarterly Report on Form 10-Q for the three months
ended March 31, 1998, dated May 14, 1998; and
(c) the Company's Current Reports on Form 8-K dated February 5, 1998
(filed February 6, 1998), March 6, 1998 (filed March 9, 1998), March 18,
1998 (filed March 20, 1998) and May 29, 1998 (filed June 2, 1998).
3
<PAGE>
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of New Notes hereunder shall be deemed to be incorporated by reference in this
Prospectus and to be a part of this Prospectus from the date of the filing
thereof. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO
EACH PERSON TO WHOM THIS PROSPECTUS IS DELIVERED UPON THE REQUEST OF SUCH
PERSON TO: NTL INCORPORATED, 110 EAST 59TH STREET, 26TH FLOOR, NEW YORK, NEW
YORK 10022, ATTENTION: RICHARD J. LUBASCH, ESQ.; TELEPHONE: (212) 906-8440. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE NO LESS
THAN FIVE DAYS PRIOR TO THE EXPIRATION OF THE EXCHANGE OFFER. IN ADDITION,
COPIES OF SUCH DOCUMENTS WILL BE MADE AVAILABLE FREE OF CHARGE AT THE SPECIFIED
OFFICE OF THE LUXEMBOURG AGENT.
----------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY NOTES OTHER THAN THE REGISTERED NOTES TO WHICH IT RELATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SUCH NOTES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
----------------
In this Prospectus, references to "pounds sterling," "(Pounds)" "pence" or
"p" are to the lawful currency of the United Kingdom and references to "U.S.
dollars," "dollars," "$" or "c" are to the lawful currency of the United
States. Solely for the convenience of the reader, this Prospectus contains
translations of certain pound sterling amounts into U.S. dollars and certain
U.S. dollar amounts into pounds sterling. These translations should not be
construed as representations that the pound sterling amounts actually represent
such U.S. dollar amounts or vice versa or could have been or could be or will
be converted into U.S. dollars or pounds sterling, as the case may be, at the
rate indicated or at any other rate. Unless otherwise indicated, the
translations of pounds sterling into U.S. dollars have been made at 1.6717 per
(Pounds)1.00, the noon buying rate in The City of New York for cable transfers
in pounds sterling as certified for customers purposes by the Federal Reserve
Bank of New York (the "Noon Buying Rate") on March 31, 1998. See "Exchange
Rates" for information regarding the Noon Buying Rate for the past ten fiscal
years. On June 3, 1997, the Noon Buying Rate was 1.6385 per (Pounds)1.00.
----------------
Although there can be no assurance that a single European currency will be
adopted or, if adopted, on what time schedule, the Treaty on the European
Economic and Monetary Union provides for the introduction of the Euro in
substitution for the national currencies of the member states which adopt the
Euro. If the United Kingdom adopts the Euro, the regulations of the European
Commission relating to the Euro would apply to each of the Sterling Senior
Notes, the Sterling Deferred Coupon Notes, the Sterling Senior Notes Indenture
(as defined) and the Sterling Deferred Coupon Notes Indenture (as defined). The
circumstances and consequences described in this paragraph entitle neither the
Company nor any holder of the Sterling Senior Notes or Sterling Deferred Coupon
Notes to early redemption, rescission, notice or repudiation of the terms and
conditions of the
4
<PAGE>
Sterling Senior Notes or Sterling Deferred Coupon Notes or the applicable
Indentures or to raise other defenses or to request any compensation claim, nor
will they affect any of the other obligations of the Company under the Sterling
Senior Notes or Sterling Deferred Coupon Notes and the applicable Indentures.
----------------
The New Notes exchanged pursuant to the Exchange Offer will be available
initially only in book-entry form and will be issued in the form of Global
Notes (as defined). The Global Notes will be deposited with, or on behalf of,
The Depository Trust Company ("DTC") and registered in its name or in the name
of Cede & Co., its nominee. Beneficial interests in the Global Notes will be
shown on, and transfers thereof will be effected through, records maintained by
DTC and its Participants (as defined). Beneficial interests in the New Notes
may be held through the Euroclear System ("Euroclear") and Cedel Bank, societe
anonyme ("CEDEL"). After initial issuance of the Global Notes, New Notes in
certificated form will be issued in exchange for the Global Notes only in
limited circumstances. See "Book-Entry; Delivery and Form" for further
discussion of these matters and for definitions of certain of the capitalized
terms used in this paragraph.
----------------
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute "forward-looking statements"
as that term is defined under the Private Securities Litigation Reform Act of
1995. When used in this Prospectus, the words, "believe," "anticipate,"
"should," "intend," "plan," "will," "expects," "estimates," "projects,"
"positioned," "strategy," and similar expressions identify such forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from those contemplated or projected, forecast, estimated or budgeted in or
expressed or implied by such forward-looking statements. Such factors include,
among others, the risk and other factors set forth under "Risk Factors" as well
as the following: general economic and business conditions, industry trends,
the Company's ability to continue to design network routes, install facilities,
obtain and maintain any required government licenses or approvals and finance
construction and development, all in a timely manner, at reasonable costs and
on satisfactory terms and conditions, as well as assumptions about customer
acceptance, churn rates, overall market penetration and competition from
providers of alternative services, and availability, terms and deployment of
capital.
5
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus or
incorporated in this Prospectus by reference. Prospective investors should
carefully consider the factors set forth under the caption "Risk Factors." As
used in this Prospectus, the term "Company" or "NTL" means NTL Incorporated
and, unless the context otherwise requires, its consolidated subsidiaries and
partnerships. Capitalized terms not defined in this Summary have the meanings
given them elsewhere in this Prospectus. Unless otherwise stated, statistical
data included in this Prospectus are as of March 31, 1998. Certain technical
terms used in this Prospectus are defined in the glossary which begins on
page A-1 of this Prospectus.
THE COMPANY
NTL is a leading communications company in the United Kingdom, providing
residential, business and wholesale customers with the following services: (i)
Residential Telecoms and Television Services including residential telephony,
cable television and Internet access services, (ii) National Telecoms Services
including national business telecoms, national and international carrier
telecommunications, and satellite and radio communications services, and (iii)
Broadcast Services including digital and analog television and radio broadcast
transmission services.
NTL provides its broad range of services over local, national and
international network infrastructure. The Company operates: (i) advanced local
broadband networks serving entire communities throughout NTL's regional
franchise areas, (ii) the UK's first synchronous digital hierarchy ("SDH")
backbone telecommunications network, as well as satellite earth stations and
radio communications facilities from NTL's tower sites across the UK, and (iii)
a broadcast transmission network which provides national, regional and local
analog and digital transmission services to customers throughout the UK.
In March 1997, the Company changed its name from International CableTel
Incorporated to NTL Incorporated to reflect the integration of the services
provided by the Company following its acquisition of NTL Group Limited in 1996,
and to capitalize on NTL Group Limited's 30 year history in the United Kingdom
as a provider of reliable communications services.
RESIDENTIAL TELECOMS AND TELEVISION SERVICES
The Company is the third largest operator of local broadband communications
systems in the UK as measured by the number of homes in its franchise areas,
and has achieved the highest customer penetration and lowest churn rates of any
multi-system operator in the UK. The Company is presently the sole provider of
broadband services in its franchise areas, offering residential telephony,
cable television and Internet access services to customers connected to its
networks.
As of March 31, 1998, the Company had 357,200 residential customers,
approximately 90% of which subscribed to both telephone and television
services. As of March 31, 1998 the Company had a total of 679,700 Revenue
Generating Units ("RGUs") resulting in 38.1% telephone penetration, 38.5% cable
penetration and 76.6% RGU penetration of homes marketed. By comparison, based
on published statistics of the Independent Television Commission ("ITC"), dated
March 9, 1998, as of January 1, 1998, UK cable customer
penetration averaged approximately 28.0% for telephone and approximately 22.2%
for cable television. As of January 1, 1998, the UK telephony cable industry
had connected approximately 3.4 million telephone lines and approximately 2.4
million broadband cable customers.
6
<PAGE>
The following table illustrates operating statistics for the Company's newly
constructed network.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------- ------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Homes passed(1).............. 1,070,000 1,007,000 779,100 463,000 144,000
Homes marketed............... 887,400 810,000 467,300 176,200 7,200
Homes marketed (as % of homes
passed)..................... 83% 80% 60% 38% 5%
Total customers(2)........... 357,200 321,300 168,200 57,700 2,280
Total RGUs(3)................ 679,700 608,500 302,000 102,330 3,960
Customer penetration......... 40% 40% 36% 33% 32%
RGU penetration(4)........... 77% 75% 65% 58% 55%
Annualized churn............. 14% 11% 10% NM NM
</TABLE>
- --------
(1) "Homes passed" is the expression in common usage in the cable industry as
the measurement of the size of a cabled area, meaning the total number of
residential premises which have the potential to be connected to the
Company's network.
(2) As of March 31, 1998, the Company also provided service to approximately
35,400 customers connected to acquired cable systems over which it does not
offer a full range of services.
(3) An RGU (revenue generating unit) is one telephone account or one CATV
account; a dual customer represents two RGUs.
(4) RGU penetration is the number of RGUs per 100 homes marketed. As defined,
maximum RGU penetration is 200%.
NM Not meaningful due to the limited customer base and recent commencement of
services.
The Company's customer base and RGUs both increased by nearly 100% in 1997
compared to year-end 1996. The Company believes that much of its success during
this period has been due to its marketing strategies and the introduction of
innovative residential services packages which bundle telephone and a small
selection of CATV channels within a single product offering. The Company also
gives customers the opportunity to purchase additional channel packages and
premium channels. Consistent with the Company's objectives, the high
penetration rates generated by this strategy have led to increased levels of
gross profit contribution per home passed.
The Company believes it has also maintained high levels of customer
satisfaction as indicated by the Company's low rates of churn. During 1997, the
Company maintained an annualized churn rate of less than 11%, a rate which is
significantly lower than the published churn rates of all other UK telephony
cable operators. In a recent survey of a sample of its customers, NTL found
that 89% of its customers would recommend the service to a friend or relative,
and that only 15% had ever considered changing their telephone service back to
British Telecommunications plc ("BT").
NTL's local franchise areas cover approximately 2.1 million homes, spanning a
wide geography across England, Scotland, Wales and Northern Ireland. As of
March 31, 1998, the Company's integrated full-service network had been
constructed past over one million (or approximately 51%) of its homes under
franchise. NTL's local broadband networks use advanced high capacity SDH fiber
rings which serve entire communities, bringing fiber connections directly to
businesses and "Siamese" coaxial/copper connections to residences. The
Company's local networks cover approximately 2,500 route miles of fiber
backbone network, with approximately 175,000 fiber miles, and an estimated
5,000 route miles of "Siamese" coaxial/copper connections.
NATIONAL TELECOMS SERVICES
The Company's objective in National Telecoms Services is to successfully
integrate its strategies for developing, operating and marketing local
telephony/cable systems with its national network to provide high-
quality voice, data and video communications services throughout the UK. The
Company has constructed a national SDH fiber telecoms network, which is one of
only five national telecoms networks in the UK. The NTL
7
<PAGE>
national network currently covers approximately 1,500 route miles and 40,000
fiber miles throughout England, Scotland and Wales. During 1998, the Company
plans to extend the network to include the first resilient fiber connection
between Northern Ireland, the Republic of Ireland and England.
The integration of its local networks with the national telecoms network
creates strategic advantages for the Company's telephony business. The national
network allows the Company to carry telecommunications traffic between each of
its franchise areas and throughout the United Kingdom and, therefore, achieve
significant savings on the interconnection fees it pays to other carriers. In
addition, using the national telecoms network gives the Company greater pricing
flexibility and will enable the Company to design and offer new telephony
services packages to its customers, which management believes should have a
positive effect on the Company's penetration rates.
Capitalizing on the extended reach of its national network, the Company is
competing for a share of the approximately (Pounds)21 billion UK telecoms
market on a national basis. In the business telecoms market, the Company has
been increasingly successful in obtaining telecoms contracts from businesses
located within its franchise areas. As of March 31, 1998, the Company had a
total of approximately 8,100 business customers, which represented growth in
the quarter of approximately 23%. The Company's current business customers
include major international corporations, universities, local governmental
authorities, and small and medium sized businesses. Management believes that it
can build on the strengths gained in its local franchise areas to approach
targeted business users located in other areas of the UK. To connect the "last
mile" to the customers' premises from the national network, NTL has a variety
of options, including building fiber where justified, using microwave links
from the NTL tower infrastructure, or leasing circuits from other local
operators. NTL launched its national business telecoms service in November 1997
and its strategy is to target medium to large businesses, beginning with those
located near the major urban areas currently served by the NTL national
network.
The Company also offers a variety of other telecommunications services from
its national fiber network and microwave transmission facilities. NTL competes
in the growing market for bandwidth and leased line services as a national and
international wholesale telecommunications carrier. The Company's international
facilities license allows it to carry international traffic, and NTL has
recently entered into an agreement for a 25 year lease of international
telecommunications capacity on a new transatlantic fiber optic cable connecting
The Netherlands, Germany, the UK and the United States. NTL is also expanding
its product portfolio to include virtual private networks, managed data
networks, ATM and frame relay services and multi-media services.
In addition to business and carrier telecoms, the Company provides the
following telecom services: (i) a full range of services in the design,
building and operation of radio based networks, and the provision of
infrastructure and support services to customers in the emergency services
sector, (ii) global satellite connectivity for clients requiring video, digital
audio and data services, and (iii) residential, wholesale and business Internet
access and support services, consulting and systems integration services, and
Intranet design and implementation.
BROADCAST SERVICES
The Company's Broadcast Services group includes the original core business of
NTL Group Limited which has been providing television and radio broadcasters
with broadcast transmission services for more than 30 years.
NTL transmits television and radio broadcast signals for the UK's main
commercial television channels and independent radio stations from a national
infrastructure of over 1,200 owned and shared transmission sites
across the UK. Current customers include the Independent Television ("ITV" or
"Channel 3") companies, Channel 4 and the Welsh Fourth Channel ("S4C"), and
Channel 5. Other customers include Teletext and many of the United Kingdom's
independent local, regional and national radio broadcasters. The Broadcast
Services group provides the Company with a stable contracted revenue stream
from a variety of customers, through long-term contracts generally with eight
to ten year terms. In addition to transmission services, the Broadcast Services
8
<PAGE>
group markets value added services to its existing television customers. This
group also designs, installs, operates and maintains new transmitter networks
and has a spectrum planning service to plan the coverage of television and
radio networks.
Two of the four recipients of the Digital Terrestrial Television ("DTT")
multiplexes awarded to date have selected the Company as the preferred supplier
of transmission services. If the Company successfully concludes contractual
arrangements with the multiplex operators, the introduction of DTT broadcasting
in the UK will significantly expand the Company's broadcasting transmission
services business.
The Company, a Delaware corporation, was incorporated on April 2, 1993. The
Company is a holding company and conducts its operations through direct and
indirect wholly owned subsidiaries. The Company is not a subsidiary of any
other company. The Company's principal executive office is located at 110 East
59th Street, New York, New York 10022, and its telephone number is (212) 906-
8440.
RECENT DEVELOPMENT
PROPOSED PARTNERS ACQUISITION
General. On February 4, 1998, the Company and NTL (Bermuda) Limited, a
Bermuda corporation and a wholly owned subsidiary of NTL ("Sub") entered into
an Agreement and Plan of Amalgamation as amended, (the "Amalgamation
Agreement") with Comcast UK Cable Partners Limited ("Partners") which provides
for the amalgamation of Sub with Partners (the "Amalgamation"), with the
separate existence of Sub and Partners continuing in the form of the company
resulting from the Amalgamation. The form and amount of consideration payable
to Partners' shareholders in the Amalgamation is dependent upon the timing of
the procedures related to certain purchase rights with respect to Partners'
interests in Birmingham Cable Corporation Limited ("Birmingham Cable") and
Cable London PLC ("Cable London") described below, whether or not such purchase
rights are ultimately exercised and, if exercised, the net after-tax proceeds
received by Partners as a result of the exercise of either or both of such
purchase rights. The maximum consideration payable to Partners' shareholders is
0.3745 shares of the Company's Common Stock for each Partner's Class A Common
Share or Class B Common Share. For more information concerning the
Amalgamation, see the Amalgamation Agreement, a copy of which has been filed
with the Commission as an exhibit to the Company's Form 8-K dated February 5,
1998, which is incorporated by reference into this Prospectus. See
"Incorporation of Certain Documents By Reference." Consummation of the
Amalgamation is subject to a number of closing conditions including regulatory
approvals, shareholder approval by the Company and Partners and consents from
their respective banks and bondholders.
Partners. Partners, an indirect controlled subsidiary of Comcast Corporation
("Comcast") was incorporated in 1992 to develop, construct manage and operate
the interests of Comcast in the UK cable and telecommunications industry. As of
March 31, 1998, Partners had interests in four operations (the "Partners
Operating Companies"): Birmingham Cable, in which Partners owns a 27.5%
interest, Cable London, in which Partners owns a 50.0% interest, Cambridge
Holding Company Limited, in which Partners owns a 100% interest and two
companies holding the franchises for Darlington and Teesside, England, in which
Partners owns a 100% interest.
The Partners Operating Companies' systems are reported to have the potential
to serve approximately 1.6 million homes and the businesses within their
franchise areas when their build-out is complete. As of December 31, 1997,
Partners reported that the Partners Operating Companies' systems passed more
than 1,197,000 homes or approximately 75% of the homes in their franchise
areas, and served more than 298,000 cable subscribers, 359,000 residential
telephony subscribers and 11,000 business telephony subscribers.
9
<PAGE>
Purchase Rights Relating to Partners' Interests in Birmingham Cable and Cable
London. As a result of the proposed Amalgamation, TeleWest Communications plc
("TeleWest"), which owns a 27.5% interest in Birmingham Cable and a 50%
interest in Cable London, has certain rights (the "Purchase Rights") to acquire
Partners' 27.5% interest in Birmingham Cable (the "Birmingham Cable Equity
Interest") and Partners' 50% interest in Cable London (the "Cable London Equity
Interest" and, together with the Birmingham Cable Equity Interest, the "Equity
Interests").
Partners and TeleWest are parties to a Co-Ownership Agreement, dated March
12, 1990, as amended and supplemented (the "Co-Ownership Agreement"), which
sets forth certain agreements and arrangements regarding their respective
investments in Birmingham Cable. Under the terms of the Co-Ownership Agreement,
neither Partners nor TeleWest (each, a "Co-Owner") may sell, assign, transfer,
pledge or otherwise dispose of, or encumber, directly or indirectly (including
by virtue of any change in control of such Co-Owner), all or any part of any
shares of capital stock of Birmingham Cable (the "Birmingham Cable Shares")
beneficially owned by such Co-Owner, without first offering the other Co-Owner
the right to purchase the Birmingham Cable Shares that are beneficially owned
by such Co-Owner. Consummation of the Amalgamation will result in a change in
control (as defined in the Co-Ownership Agreement) of Partners and,
accordingly, subject to the terms and conditions of the Co-Ownership Agreement,
TeleWest has the right to acquire the Birmingham Cable Equity Interest. On
February 6, 1998, Partners notified TeleWest of its intent to Transfer (as
defined herein) the Birmingham Cable Equity Interest as a result of the
proposed Amalgamation. This notification triggered TeleWest's right to acquire
the Birmingham Cable Equity Interest, subject to the terms and conditions set
forth in the Co-Ownership Agreement.
Under the terms of Cable London's articles of association, a change of
control of Partners will give rise to a deemed offer by partners, as at the
date of such change in control, of all of its shares of capital stock in Cable
London to TeleWest. Consummation of the Amalgamation will result in a change of
control (as defined in Cable London's articles of association) of Partners and,
accordingly, subject to the provisions of Cable London's articles of
association, TeleWest will have the right to acquire the Cable London Equity
Interest. In contrast to TeleWest's right to acquire the Birmingham Cable
Equity Interest, which has already been triggered, TeleWest's right to acquire
the Cable London Equity Interest will not be triggered until the Amalgamation
has been consummated. Thus, unless there is a negotiated agreement between
Partners and TeleWest prior to such time, there will have been no resolution at
the time of consummation of the Amalgamation (the "Effective Time") of whether
TeleWest will exercise such right.
Effects of the Purchase Rights on the Amalgamation Consideration. The
consideration to be received by shareholders of Partners in the Amalgamation is
dependent upon the timing of the procedures related to each of the Purchase
Rights, whether or not the Purchase Rights are ultimately exercised by TeleWest
and, if exercised, the net after-tax proceeds received by Partners in exchange
for the Birmingham Cable Equity Interest or the Cable London Equity Interest or
both, as the case may be. The consideration to be received by shareholders of
Partners in the Amalgamation will be determined as of the fifth business day
prior to the Effective Time. This determination will be made by the Company,
based in part on the status of the Purchase Rights and in part in the Company's
sole discretion.
On April 16, 1998, TeleWest announced that, subject to the valuations
determined for the Equity Interests and the availability of financing, it
proposed to exercise its rights to acquire the Equity Interests. There can be
no assurances that TeleWest will ultimately exercise its rights to acquire the
Equity Interests.
10
<PAGE>
THE EXCHANGE OFFER
Notes Offered............... Up to (Pounds)125,000,000 aggregate principal
amount of New Sterling Senior Notes, up to
(Pounds)300,000,000 aggregate principal amount at
maturity of New Sterling Deferred Coupon Notes
and up to $1,300,000,000 aggregate principal
amount at maturity of New USD Deferred Coupon
Notes. The terms of the New Notes and the Old
Notes are identical in all material respects,
except for certain transfer restrictions and
registration rights relating to the Old Notes and
except for certain provisions providing for
special interest on the Old Notes under certain
circumstances relating to the timing of the
Exchange Offer.
The Exchange Offer.......... The New Sterling Senior Notes are being offered
in exchange for a like principal amount of Old
Sterling Senior Notes that are properly tendered
and accepted. The New Sterling Deferred Coupon
Notes and the New USD Deferred Coupon Notes,
respectively, are being offered in exchange for a
like principal amount of maturity of Old Sterling
Deferred Coupon Notes and Old USD Deferred Coupon
Notes, respectively, in each case that are
properly tendered and accepted. The issuance of
the New Notes is intended to satisfy obligations
of the Company contained in the Registration
Rights Agreements (the "Registration Rights
Agreements") each dated March 13, 1998, by and
among the Company and (i) in the case of the
Registration Rights Agreements relating to the
Old Sterling Senior Notes and the Old Sterling
Deferred Coupon Notes, respectively, Donaldson,
Lufkin & Jenrette International, Morgan Stanley &
Co. International Limited, BT. Alex Brown
International, Division of Bankers Trust
International PLC, Chase Securities Inc., and
Salomon Brothers International Limited, and (ii)
in the case of the Registration Rights Agreement
relating to the Old Sterling Deferred Coupon
Notes, Donaldson, Lufkin & Jenrette Securities
Corporation, Morgan Stanley & Co. Incorporated,
BT. Alex Brown Securities Corporation, Chase
Securities Inc., and Salomon Brothers Inc
(collectively in (i) and (ii) the "Initial
Purchasers") as the initial purchasers with
respect to the initial sale of the Old Notes. For
procedures for tendering, see "The Exchange
Offer."
Tenders, Expiration Date; The Exchange Offer will expire at 5:00 p.m., New
Withdrawal............... York City time, on , 1998, or such later
date and time to which it is extended (the
"Expiration Date"). Each holder tendering Old
Notes must acknowledge that it is not engaging
in, nor intends to engage in, a distribution of
the New Notes. The tender of Old Notes pursuant
to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. Any Old Notes
not accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
11
<PAGE>
Federal Income Tax
Consequences............. The exchange pursuant to the Exchange Offer
should not result in any income, gain or loss to
holders of Old Notes exchanging the same for New
Notes pursuant to the Exchange Offer or the
Company for federal income tax purposes. See
"Certain Federal Income Tax Considerations."
Use of Proceeds............. There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer.
Exchange Agent.............. The Chase Manhattan Bank through its specified
offices in New York and Luxembourg is serving as
the Exchange Agent for the Exchange Offer in
respect of the Notes. See "The Exchange Offer--
Exchange Agent."
Shelf Registration
Statement................ Under certain circumstances, certain holders of
Old Notes (including holders who may not
participate in the Exchange Offer, or who may not
freely resell New Notes received in the Exchange
Offer) may require the Company to file, and cause
to become effective, a shelf registration
statement under the Securities Act, which would
cover resales of Old Notes by such holders. See
"Registration Rights."
12
<PAGE>
CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE EXCHANGE OFFER
Based on interpretations by the staff of the Commission in no action letters
issued to third parties, generally holders of Old Notes (other than any holder
who is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) who exchange their Old Notes for New Notes pursuant to the
Exchange Offer may offer such New Notes for resale, resell such New Notes, and
otherwise transfer such New Notes without compliance with the registration and
prospectus delivery provisions of the Securities Act; provided that such New
Notes are acquired in the ordinary course of the holders' business and such
holders, other than brokers-dealers, are not engaged in, do not intend to
engage in and have no arrangement or understanding with any person to
participate in, a distribution of such New Notes.
Each broker-dealer who holds Old Notes acquired for its own account as a
result of market-making activities or other trading activities, and who
receives New Notes in exchange for such Old Notes pursuant to the Exchange
Offer, may be an "underwriter" within the meaning of the Securities Act and
must acknowledge that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Notes. See "Plan
of Distribution."
To comply with the securities laws of certain jurisdictions, it may be
necessary to qualify for sale or register thereunder the New Notes prior to
offering or selling such New Notes. The Company has agreed, pursuant to the
Registration Rights Agreements and subject to certain specified limitations
therein, to register or qualify the New Notes held by broker-dealers for offer
or sale under the securities or blue sky laws of such jurisdictions as any such
holder of such New Notes reasonably requests in writing. Unless the Company is
so requested, the Company does not intend to register or qualify the sale of
the New Notes in any such jurisdictions.
If a Holder of Old Notes does not exchange such Old Notes for New Notes
pursuant to the Exchange Offer, such Old Notes will continue to be subject to
provisions of the applicable Indenture regarding transfer and exchange of the
Old Notes and the restrictions on transfer contained in the legend on the Old
Notes. In general, Old Notes may not be offered or sold unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will take any action to register
Old Notes under the Securities Act. See "The Exchange Offer--Consequences of
Failure to Exchange" and "Registration Rights."
13
<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and except for certain provisions under the
Registration Rights Agreements providing for special interest on the Old Notes
under certain circumstances relating to timing of the Exchange Offer, which on
each case will terminate upon consummation of the Exchange Offer.
Securities Offered.......... Up to (Pounds)125,000,000 principal amount of 9
1/2% Series B Senior Notes due 2008, up to
(Pounds)300,000,000 principal amount at maturity
of 10 3/4% Series B Sterling Senior Deferred
Coupon Notes due 2008 and up to $1,300,000,000
principal amount at maturity of 9 3/4% Senior
Deferred Coupon Notes due 2008.
Maturity Date............... April 1, 2008.
Yield and Interest.......... Interest on the New Sterling Senior Notes will
accrue at the rate of 9.5% per annum and will be
payable in cash semiannually on April 1 and
October 1, commencing on October 1, 1998. The
issue price of each Old Sterling Deferred Coupon
Note and each Old USD Deferred Coupon Note
represents a yield to maturity of 10.8% and 9.77%
per annum, respectively (computed on a semiannual
bond equivalent basis). Cash interest will not
accrue on the New Sterling Deferred Coupon Notes
or the New USD Deferred Coupon Notes prior to
April 1, 2003. Commencing April 1, 2003, cash
interest on the New Sterling Deferred Coupon
Notes and the New USD Deferred Coupon Notes will
accrue and be payable, semiannually in arrears on
April 1, and October 1, commencing October 1,
2003. See "Description of New Notes."
Ranking..................... Each class of New Notes (the New Sterling Senior
Notes, the New Sterling Deferred Coupon Notes and
the New USD Deferred Coupon Notes) will rank
senior in right of payment to all subordinated
indebtedness of the Company and will rank pari
passu in right of payment with each other and
with all existing and future unsubordinated
obligations of the Company. As of March 31, 1998,
the Company had approximately $2.9 billion of
unsubordinated debt outstanding. Such
unsubordinated debt includes the Company's New
Notes, its 10 7/8% Senior Deferred Coupon Notes
Due 2003 (the "10 7/8% Notes"), its 12 3/4%
Senior Deferred Coupon Notes Due 2005 (the "12
3/4% Notes"), its 11 1/2% Senior Deferred Coupon
Notes Due 2006 (the "11 1/2% Notes and, together
with the 10 7/8% and the 12 3/4% Notes, the
"Existing Deferred Coupon Notes"), and its 10%
Senior Notes Due 2007 (the "10% Notes" and,
together with the Existing Deferred Coupon Notes,
the "Existing Notes"). The New Notes will be
effectively subordinated to all existing and
future indebtedness and other liabilities of the
Company's subsidiaries with respect to the cash
flow and assets of those subsidiaries. As of
March 31, 1998, such subsidiaries had
approximately $342 million ((Pounds)205 million)
of total liabilities.
14
<PAGE>
The New Notes will rank senior to the Company's
7% Convertible Subordinated Notes due 2008 (the
"Convertible Notes"). See "Risk Factors--
Potential Adverse Consequences of Leverage."
Optional Redemption......... On or after April 1, 2003, the Notes will be
redeemable at the option of the Company, in whole
at any time or in part from time to time, at the
redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the date of
redemption.
Change of Control........... Upon the occurrence of a Change of Control
Triggering Event (which requires a Change of
Control (as defined) and a Ratings Decline (as
defined)), the Company will be required to make
an offer to purchase all of the Notes at 101% of
principal amount thereof plus accrued and unpaid
interest to the date of purchase (or, in the case
of repurchases of Sterling Deferred Coupon Notes
or USD Deferred Coupon Notes prior to April 1,
2003, at a purchase price equal to 101% of the
Accreted Value thereof at the date of
repurchase). The Company may not have sufficient
funds or the financial resources necessary to
satisfy its obligations to repurchase the Notes
and other debt that may become repayable upon a
Change of Control Triggering Event.
Certain Covenants........... Each of: (i) the indenture governing the Sterling
Senior Notes (the "Sterling Senior Notes
Indenture"), (ii) the indenture governing the
Sterling Deferred Coupon Notes (the "Sterling
Deferred Coupon Notes Indenture") and (iii) the
indenture governing the USD Deferred Coupon Notes
(the "USD Deferred Coupon Notes Indenture" and,
together with the Sterling Senior Notes Indenture
and the Sterling Deferred Coupon Notes Indenture,
the "Indentures") contain covenants relating to,
among other things, the following matters: (i)
restricted payments; (ii) incurrence of
additional indebtedness and issuance of preferred
stock; (iii) liens; (iv) dividend and other
payment restrictions affecting subsidiaries; (v)
mergers, consolidations and sales of assets; (vi)
transactions with affiliates; and (vii) reports.
Original Issue Discount..... The Old Sterling Deferred Coupon Notes and the
Old USD Deferred Coupon Notes were issued on
March 13, 1998 at an issue price of
(Pounds)586.20 per (Pounds)1,000 and $617.24 per
$1,000 principal amount at maturity,
respectively. Each of the New Sterling Deferred
Coupon Notes and the New USD Deferred Coupon
Notes will be treated as having been issued with
original issue discount for United States federal
income tax purposes. Thus, although cash interest
will not accrue on the Sterling Deferred Coupon
Notes or the USD Deferred Coupon Notes prior to
April 1, 2003, original issue discount (i.e., the
difference between the sum of all principal and
interest payable on the Sterling Deferred Coupon
Notes or the USD Deferred Coupon Notes, as the
case may be, and the issue price of the Sterling
Deferred Coupon Notes or the USD Deferred Coupon
Notes, as the case may be) will accrue from the
issue date of the Old Sterling Deferred Coupon
Notes or the Old USD Deferred Coupon Notes, as
15
<PAGE>
the case may be, and will be included as interest
income periodically (including for periods ending
prior to October 1, 2003) in a holder's gross
income for United States federal income tax
purposes in advance of receipt of the cash
payments to which the income is attributable. See
"Certain Federal Income Tax Considerations."
Registration Rights......... Holders of New Notes (other than as set forth
below) are not entitled to any registration
rights with respect to the New Notes. Pursuant to
the Registration Rights Agreement, the Company
agreed to use its best efforts to file an
Exchange Offer Registration Statement (as
defined). The Registration Statement of which
this Prospectus is a part constitutes the
Exchange Offer Registration Statement. Under
certain circumstances, certain Holders of Notes
(including Holders of Notes who may not
participate in the Exchange Offer or who may not
freely resell New Notes received in the Exchange
Offer) may require the Company to file, and cause
to become effective, a shelf registration
statement under the Securities Act, which would
cover resales of Notes by such Holders before
making a decision to tender their Old Notes in
the Exchange Offer.
Use of Proceeds............. The Company will not receive any proceeds from
the Exchange Offer. The Company intends to use
the proceeds of the offering of the Old Notes to
finance the construction, capital expenditure and
working capital requirements (including debt
service and repayment obligations) of the Company
and, potentially, to refinance existing
indebtedness. In addition, a portion of the net
proceeds of the offering of the Old Notes may
also be used to make acquisitions of businesses
or assets related to the Company's business. See
"Use of Proceeds."
Governing Law and The Notes and the Indentures will be governed
Judgments................... exclusively by the laws of the State of New York.
Under the Judiciary Law of the State of New York,
a judgment or decree in an action based upon an
obligation denominated in a currency other than
U.S. dollars will be rendered in the foreign
currency of the underlying obligation and
converted into U.S. dollars at a rate of exchange
prevailing on the date of the entry of the
judgment or decree.
Form of Notes............... Each of the New Notes will initially be
represented by one or more global New Notes in
registered form, without coupons attached
(collectively, the "Global New Notes"), each of
which will be issued in an aggregate denomination
equal to the outstanding principal amount at
maturity of the New Notes represented thereby.
Except as set forth under "Description of the New
Notes," owners of beneficial interests in the
Global New Notes will not be entitled to receive
physical delivery of New Notes in definitive form
or to have the New Notes issued and registered in
their names and will not be considered the owners
or holders thereof under the applicable
Indenture. Interests in the Global New Notes will
be shown on, and transfers thereof will be
effected only through, records maintained in
book-entry form by The Depository Trust Company
("DTC") or
16
<PAGE>
its nominee with respect to its participants.
Ownership of the interests in the Global New
Notes will be limited to persons that have
accounts with DTC ("Participants") or persons
that may hold interests through Participants.
Investors may elect to own interests in a Global
New Note through the Morgan Guaranty Trust
Company, Brussels office as operator of the
Euroclear System ("Euroclear") or Cedel Bank,
societe anonyme ("CEDEL") in Europe, if they are
participants in such systems, or indirectly
through organizations which are participants,
through their respective depositaries, Morgan
Guaranty Trust Company of New York and Citibank,
N.A., which in turn will hold such interests in
accounts as Participants.
Listing..................... Application has been made to list the New Notes
on the Luxembourg Stock Exchange.
RISK FACTORS
Holders of Old Notes should carefully consider the information set forth
under the caption "Risk Factors" and all other information set forth in this
Prospectus before tendering their Old Notes in the Exchange Offer, although the
risk factors (other than "--Consequences of Failure to Exchange Old Notes" and
"--Requirements for Transfer of New Notes") are generally applicable to the Old
Notes as well as the New Notes.
17
<PAGE>
RISK FACTORS
Holders of Old Notes should consider carefully all of the information set
forth in this Prospectus and incorporated by reference in this Prospectus. See
"Available Information" and "Incorporation of Documents By Reference." Holders
should particularly evaluate the following risks before tendering their Old
Notes in the Exchange Offer, although the risk factors set forth below (other
than the first two risk factors) are generally applicable to the New Notes as
well as the Old Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made following the prior satisfaction, or waiver, of
the conditions set forth in "The Exchange Offer--Certain Conditions to the
Exchange Offer" and only after a timely receipt by the Exchange Agent of such
Old Notes, a properly completed and duly executed Letter of Transmittal in
respect of such Old Notes and all other required documents. Therefore, holders
of Old Notes desiring to tender such Old Notes in exchange for New Notes
should allow sufficient time to ensure timely delivery. Neither the Exchange
Agent nor the Company is under any duty to give notification of defects or
irregularities with respect to the tenders of Old Notes for exchange. Old
Notes that are not tendered or are tendered but not accepted will, following
the consummation of the Exchange Offer, continue to be subject to the
provisions of the applicable Indenture regarding transfer and exchange of the
Old Notes, the existing restrictions upon transfer thereof set forth in the
legend on the Old Notes and in the Offering Memorandum dated March 6, 1998
relating to the Old Notes (the "Offering Memorandum"). Except in certain
limited circumstances with respect to certain types of holders of Old Notes
(see "Registration Rights"), the Company will have no further obligation to
provide for the registration under the Securities Act of such Old Notes. In
general, Old Notes, unless registered under the Securities Act, may not be
offered or sold except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will take any action to register
the Old Notes under the Securities Act or blue sky laws.
REQUIREMENTS FOR TRANSFER OF NEW SECURITIES
Based on interpretations by the staff of the Commission, as set forth in no
action letters issued to third parties, the Company believes that the New
Notes issued in exchange for the Old Notes, pursuant to the Exchange Offer may
be offered for resale, resold or otherwise transferred by Holders thereof
(other than any such Holder which is an "affiliate" of the Issuer within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
Holders' business and such Holders have no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
such New Notes. Each Holder, other than a broker-dealer, must acknowledge that
it is not engaged in, and does not intend to engage in, and has no arrangement
or understanding with any person to participate in, a distribution of New
Notes. If any Holder is an affiliate of the Company, is engaged in or intends
to engage in or has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such Holder (i) could not rely on the applicable interpretations of the staff
of the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transactions. Each broker-dealer who holds Old Notes acquired for its own
account as a result of market-making activities or other trading activities,
and who receives New Notes in exchange for such Old Notes pursuant to the
Exchange Offer, may be an "underwriter" within the meaning of the Securities
Act and must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading
18
<PAGE>
activities. The Company has agreed that starting on the Expiration Date and
ending on the close of business of the 180th day following the Expiration
Date, it will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution." However, to
comply with the securities laws of certain jurisdictions, if applicable, the
New Notes may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or an exemption from registration nor
qualification is available and is complied with. The Company has agreed,
pursuant to the Registration Right Agreements and subject to certain specified
limitations therein, to register or qualify the New Notes for offer or sale
under the securities or blue sky laws of such jurisdiction as any holder of
the Notes reasonably request in writing. Unless the Company is so requested,
the Company does not intend to take any action to register or qualify the sale
of the New Notes in any such jurisdictions. See "The Exchange Offer--
Consequences of Exchanging Old Notes."
POTENTIAL ADVERSE CONSEQUENCES OF LEVERAGE
The Company is and, following the consummation of the Exchange Offer will
continue to be, highly leveraged. At March 31, 1998, the accrued value of the
Company's total long-term indebtedness (including the Redeemable Preferred
Stock (as defined)) was approximately $3.5 billion, representing approximately
104% of total capitalization. Chase has agreed under the New Credit Facility
to fully underwrite a (Pounds)555 million term loan facility. By April 14,
1999, Chase's commitment will be reduced to no less than (Pounds)480 million
or such greater amount as is necessary to ensure that the Company's UK
operations remain fully funded by reference to an agreed business plan. As the
Company's subsidiaries draw down amounts available under the New Credit
Facility, the amount of debt outstanding will increase further. The indentures
governing the Existing Notes and the Convertible Notes permit the Company and
its subsidiaries to incur substantial additional indebtedness. The ability of
the Company and its subsidiaries to make scheduled payments under present and
future indebtedness (including the Notes) will depend on, among other things,
the Company's and its subsidiaries' ability to complete the build out of the
franchises on a timely and cost effective basis, the Company's ability to
access the earnings of its subsidiaries (which may be subject to significant
contractual and legal limitations), the future operating performance of the
Company and its subsidiaries and the Company's ability to refinance its
indebtedness when necessary. Each of these factors is to a large extent
subject to economic, financial, competitive, regulatory and other factors that
are beyond the Company's and its subsidiaries' control. See "--Uncertainty of
Construction Progress and Costs," "--Need for Additional Financing" and "--
Holding Company Structure; Dependence Upon Cash Flow from Subsidiaries."
The New Credit Facility contains, and future agreements and debt instruments
may contain, various covenants which, among other things, require the Company
to maintain certain financial ratios, restrict or prohibit the payment of
dividends and other distributions to the Company by its subsidiaries, restrict
asset sales and dictate the use of proceeds from the sale of assets. Although
the Company believes that it and its subsidiaries are in compliance with their
respective covenants and restrictions, continued compliance with these
restrictions, in combination with the leveraged nature of the Company, could
limit the ability of the Company to respond to market conditions or meet
extraordinary capital needs or otherwise could restrict corporate activities
and the ability of certain subsidiaries of the Company to make payments to the
Company which might otherwise fund payments due on the Notes and the Company's
other obligations as they fall due. See "--Holding Company Structure;
Dependence Upon Cash Flow from Subsidiaries." There can be no assurance that
such restrictions will not adversely affect the Company's ability to finance
its future operations or capital needs, to service and repay indebtedness
(including, without limitation, the Notes) or to engage in other business
activities, such as acquisitions, which may be in the interest of the Company.
The degree to which the Company is leveraged could have important
consequences to holders of the Notes including the following: (i) increasing
the Company's vulnerability to adverse changes in general economic conditions
or increases in prevailing interest rates; (ii) limiting the Company's ability
to obtain additional financing for working capital, capital expenditures,
acquisitions and general corporate purposes, including the build out of the
networks in the franchises and the development and expansion of the Company's
business; (iii) requiring a substantial portion of the Company's and its
subsidiaries' cash flow from operations to be
19
<PAGE>
dedicated to debt service requirements, thereby reducing the funds available
for dividends, operations and future business opportunities; and (iv)
increasing the Company's and its subsidiaries' exposure to increases in
interest rates given that certain of the Company's and its subsidiaries'
borrowings may be at variable rates of interest.
In addition, the Company may under certain circumstances be obligated to
offer to repurchase certain outstanding securities prior to maturity and there
can be no assurance that the Company will have the financial resources
necessary or otherwise be able to repurchase those securities in such
circumstances (including, without limitation, on the occurrence of a Change in
Control Triggering Event).
NEED FOR ADDITIONAL FINANCING
The Company will continue to require significant amounts of capital to
finance construction of its local and national networks, for connection of
telephone, telecommunications and CATV customers to the networks, for other
capital expenditures, as well as for cash interest payments. Based on the
information currently available, the Company estimates that, from April 1,
1998 through March 31, 1999, these requirements will aggregate (Pounds)354
million (approximately $580 million). The Company intends to fund its
requirements from cash, cash equivalents and marketable securities on hand of
$1.2 billion as of March 31, 1998. The Company has significant capital
requirements for the completion of its telephone, telecommunications and CATV
network passed the total of 2,090,000 homes required by its regulatory build
schedules, for its LDL payments and for scheduled cash interest and principal
payments beyond March 31, 1999. In addition, the Company will require
significant amounts of capital to finance the other capital expenditures and
the cost of operations of the Company, its subsidiaries and joint ventures and
meet all their other obligations as they fall due. The Company intends to fund
the requirements referred to in this paragraph from cash, cash equivalents and
marketable securities on hand, amounts available under the New Credit Facility
and funds internally generated by the operations of the Company's
subsidiaries, but there can be no assurance that such resources will be
available or adequate to meet expected requirements. See "Description of
Certain Indebtedness--The New Credit Facility."
In addition, all or a substantial portion of the indebtedness of the Company
(other than the Notes) matures prior to the maturity of the Notes. The
Company's ability to make cash payments pursuant to the terms of the Notes may
be dependent, in part, on the Company's ability to refinance that indebtedness
which will depend, in part, on factors beyond the control of the Company. The
Redeemable Preferred Stock is mandatorily redeemable on February 15, 2009 and
such mandatory redemption provisions may have a material adverse effect on the
Company's ability to obtain additional financing or refinancing.
Management does not anticipate that the Company and its subsidiaries will
generate sufficient cash flow from operations to repay at maturity the entire
principal amount of the Existing Notes, the Convertible Notes and other
outstanding indebtedness of the Company and its subsidiaries. In addition, it
may be necessary for the Company to refinance the Notes at maturity.
Accordingly, the Company will be required to consider a number of measures,
including: (i) refinancing all or a portion of such indebtedness, (ii) seeking
modifications of the terms of such indebtedness, (iii) seeking additional debt
financing, which would be subject to obtaining necessary lender consents, (iv)
seeking additional equity financing, or (v) a combination of the foregoing.
The particular measures the Company may undertake and the ability of the
Company to accomplish those measures will depend on the financial condition of
the Company and its subsidiaries at the time, as well as a number of factors
beyond the control of the Company and its subsidiaries, including prevailing
economic and market conditions and financial, business and other factors. No
assurance can be given that any of the foregoing measures can be accomplished,
or can be accomplished in sufficient time to make timely payments with respect
to the Company's indebtedness. In addition, there can be no assurance that any
such measures can be accomplished on terms which are favorable to the Company
and its subsidiaries.
The Company will continue to consider strategic acquisitions and
combinations involving businesses operating, or owning licenses to operate,
cable, telephone, television or telecommunications systems or services and
related businesses principally in the United Kingdom, as attractive
opportunities arise. The Company is currently involved in various stages of
exploration, development and negotiation of certain transactions, some of
20
<PAGE>
which, if completed, would be significant and may involve the incurrence of
substantial indebtedness or the raising of additional equity by the Company
and its subsidiaries to finance such transactions. There can be no assurances
that such transactions will occur. The indentures governing the Notes and the
Existing Notes permit indebtedness to be incurred to finance acquisitions only
if such acquisitions are acquisitions of either tangible or intangible assets,
licenses and computer software used in connection with a Cable Business (as
defined in such indentures) or certain entities, directly or indirectly
engaged in a Cable Business if such entities meet certain qualifying criteria
specified in such indentures.
HOLDING COMPANY STRUCTURE; DEPENDENCE UPON CASH FLOW FROM SUBSIDIARIES
The Company is a holding company that conducts its operations through its
direct and indirect wholly-owned subsidiaries and affiliated joint ventures.
As a holding company, the Company holds no significant assets other than its
investments in and advances to its subsidiaries and affiliated joint ventures.
The Company is, therefore, dependent upon its receipt of sufficient funds from
its subsidiaries and affiliated joint ventures to meet its own obligations.
The ability of the Company and, therefore, the holders of the Notes, to
benefit in the distribution of any assets of any of the Company's subsidiaries
and affiliated joint ventures upon any liquidation of any such subsidiary or
joint venture will be subject to the prior claims of the subsidiary's or joint
venture's creditors, including trade creditors and, to the extent that such
subsidiary or joint venture is not directly owned by the Company, to the prior
claims of the creditors of any other persons directly or indirectly owning
such subsidiary or joint venture.
Each of the Company's subsidiaries that is a Delaware corporation may pay
dividends, under the Delaware General Corporation Law (the "DGCL"), only out
of its surplus, or, in the event that it has no surplus, out of its net
profits for the fiscal year in which the dividend is declared or for the
immediately preceding fiscal year. Each of the Company's subsidiaries that is
a United Kingdom company is, under applicable United Kingdom law, prohibited
from paying dividends unless such payments are made out of profits available
for distribution (which consist of accumulated, realized profits, so far as
not previously utilized by distribution or capitalization, less accumulated,
realized losses, so far as not previously written off in a reduction or
reorganization of capital duly made). Other statutory and general English law
obligations also affect the ability of directors of the Company's subsidiaries
to declare dividends and the ability of the Company's subsidiaries to make
payments to the Company on account of intercompany loans. In addition, the
United Kingdom may impose a withholding tax on payments of interest and
advance corporation tax on distributions (of interest, dividends or otherwise)
by United Kingdom subsidiaries of the Company.
In addition, the terms of the New Credit Facility limit, and the terms of
existing and future indebtedness of the Company's subsidiaries may limit, the
payment of dividends, loans or other distributions to the Company. In the
absence of a default, the New Credit Facility generally permits payments to
the Company to pay the interest and principal of existing indebtedness of the
Company. See "Description of Certain Indebtedness--The New Credit Facility."
The Old Notes are, and the New Notes will be, effectively subordinated to
all existing and future indebtedness and other liabilities and commitments of
the Company's subsidiaries, including borrowings under
the New Credit Facility. As of March 31, 1998, the total liabilities of the
Company's subsidiaries were approximately $342 million ((Pounds)205 million).
In addition, the Indentures permit subsidiaries of the Company to incur
additional Indebtedness (as defined in the Indentures) to finance the
construction, capital expenditure and working capital needs of a Cable
Business and the acquisition of Cable Assets (as defined in the Indentures) or
the acquisitions of certain entities, directly or indirectly, engaged in a
Cable Business, if such entities meet certain qualifying criteria specified in
the Indentures. In light of the Company's strategy of continued growth, in
part through acquisitions, the Company and its subsidiaries may incur
substantial indebtedness in the future. See "Description of New Notes."
Borrowings under the New Credit Facility are, and a substantial portion of the
Company's and its subsidiaries' future indebtedness is expected to be, secured
by liens and other security interests over the assets of the Company's
subsidiaries and the Company's equity interests in the Company's subsidiaries.
In addition, the ability of the Company and, therefore, the holders of the
Notes to benefit from
21
<PAGE>
distributions of assets of the Company's subsidiaries may be limited to the
extent that the outstanding shares of any of its subsidiaries and such
subsidiary's assets are pledged to secure other debt of the Company or its
subsidiaries. Any right of the Company to receive assets of any subsidiary
upon such subsidiary's liquidation or reorganization will be structurally
subordinated to the claims of that subsidiary's creditors, except to the
extent that the Company is itself recognized as an unsubordinated creditor of
such subsidiary. However, to the extent that the Company is so recognized, the
claims of the Company would still be subject to any security interests in the
assets of such subsidiary and any liabilities of such subsidiary senior to
those held by the Company and may otherwise be challenged by third parties in
a liquidation or reorganization proceeding. In addition, the New Credit
Facility requires the Company to subordinate its right to repayment of
indebtedness outstanding between it and the borrower under such agreement or
any other subsidiary of the Company to the rights of the lenders under the
agreement. In particular the rights of the Company and other subsidiaries to
repayment of principal and interest lent by them to the borrower or other
subsidiaries under the New Credit Facility have been and will be subordinated
to the rights of the lenders under the New Credit Facility pursuant to
subordination agreements with such lenders.
The principal fixed assets of the Company's subsidiaries are cable headends,
cable television and telecommunications distribution equipment,
telecommunications switches and customer equipment, transmission towers, masts
and antennas and the sites on which they are located. The value of a
substantial portion of these fixed assets is derived from their employment in
the Company's and its subsidiaries' businesses. These assets are highly
specialized and, taken individually, can be expected to have limited
marketability. Consequently, in the event that secured creditors seek to
realize on the collateral securing debt of the Company's subsidiaries, these
creditors would be likely to seek to sell the business as a going concern
(possibly through a sale of pledged shares of subsidiaries), either in its
entirety, or by franchise or other business unit, in order to maximize the
proceeds realized.
THE PROPOSED PARTNERS ACQUISITION
The Company has entered into the Amalgamation Agreement to acquire Partners.
See "Prospectus Summary--Recent Development". Any benefits from the
Amalgamation could be less than anticipated. Other potential risks include the
risk that integration of Partners with the Company and with the Company's
national transmission network may be more difficult than expected, the
presence of unknown liabilities and the lack of majority control of certain
assets (the Cable London Equity Interest and the Birmingham Cable Equity
Interest), and the possible loss of those assets upon exercise of the Purchase
Rights. While there have been various oral communications and written
correspondence between NTL and Partners, on the one hand, and TeleWest, on the
other hand, with respect to matters related to the Purchase Rights, the
parties have no agreement, arrangement or understanding with respect to the
Purchase Rights and there can be no assurances that the parties will reach any
such agreement, arrangement or understanding prior to the consummation of the
Amalgamation. On April 16, 1998, TeleWest announced that, subject to the
valuation and the availability of financing, it proposed to exercise the
Purchase Rights. There can be no assurances that TeleWest will exercise either
or both of the Purchase Rights. While the Company believes that the
acquisition of Partners will be beneficial to the Company and its
shareholders, there can be no assurance that (i) if completed, the expected
benefits will be realized, (ii) the potential risks will not be realized, or
(iii) such risks can be managed without adversely affecting the Company.
The Company has not yet determined whether the Amalgamated Company will be
treated as a Restricted Subsidiary or a Non-Restricted Subsidiary under the
Indentures, although designation as a Non-Restricted Subsidiary would require
consent of a majority of the holders under each of the Indentures governing
the Existing Notes. If the Amalgamated Company is designated as a Non-
Restricted Subsidiary, it will not be subject to the covenants of the
Indentures. Even if the Amalgamated Company is designated as a Restricted
Subsidiary, it may continue to be subject to the restrictions on payment of
dividends to the Company and other restrictive covenants
22
<PAGE>
contained in Partners' existing debt instruments. As a result of such
restrictions, there can be no assurance that the Company will be able to gain
access to the cash flow of Partners as a source of payment for the Notes or
for the Company's other indebtedness. There can also be no assurance that the
Amalgamation will be completed, or of the timing of any such completion.
OPERATING LOSSES
The Company had net losses for the three months ended March 31, 1998 and
1997 and for the years ended December 31, 1997, 1996, 1995, 1994 and 1993 of
$(93.7 million), $(85.8 million), $(333.1 million), $(254.5 million), $(90.8
million), $(29.6 million) and $(11.1 million), respectively. As of March 31,
1998, the Company's accumulated deficit was $810.7 million. The development of
the Company's business to date has resulted in significant expenditures and
the continued construction and expansion of its network will require
considerable additional expenditures. Construction and operating expenditures
have resulted in negative cash flow, which is expected to continue at least
until an adequate customer base is established. The Company also expects to
incur substantial additional operating losses, and there can be no assurance
that the Company will achieve or sustain profitability in the future. Failure
to become profitable could adversely affect the Company's ability to sustain
operations and obtain additional required funds. See "--Need for Additional
Financing." Moreover, such a failure would adversely affect the Company's
ability to pay the required payments on the Notes, the Company's other
indebtedness and the Redeemable Preferred Stock. See "--Potential Adverse
Consequences of Leverage," "--Need for Additional Financing" and "--Holding
Company Structure; Dependence Upon Cash Flow from Subsidiaries."
DEFICIENCY OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
For the three months ended March 31, 1998 and the years ended December 31,
1997, 1996, 1995, 1994 and 1993, the Company's earnings were insufficient to
cover fixed charges by approximately $94.6 million, $355.4 million, $257.1
million, $105.4 million, $31.8 million and $10.4 million, respectively. The
Company's earnings for the three months ended March 31, 1998 and the year
ended December 31, 1997 were insufficient to cover combined fixed charges and
preferred stock dividends by $98.2 million and $367.4 million, respectively.
Fixed charges consist of interest expense, including capitalized interest,
amortization of fees related to debt financing and rent expense deemed to be
interest. The issuance of the Old Notes had the effect of increasing the total
amount of the Company's indebtedness and increasing its interest expense in
subsequent periods.
REQUIREMENT TO MEET BUILD MILESTONES
The telecommunications license for each franchise contains specific
construction milestones. Under the terms of its current telecommunications
licenses, by the end of 2005 the Company is required to construct cable
television systems passing an aggregate of approximately 2,090,000 premises
(residential and business). The Office of Telecommunications ("OFTEL") and the
Department of Trade and Industry ("DTI") are the only bodies with the
authority to modify the construction milestones in the licenses other than the
Northern Ireland and Gwent and Glamorgan local delivery operator licenses
("LDLs") (in respect of which the Independent Television Commission (the
"ITC") is the relevant authority for modifying construction milestones). Based
on current network construction, the Company believes it will be able to
satisfy the Company's milestones in the future, but there can be no assurance
that such milestones will be met. See "--Need for Additional Financing" and
"-- Uncertainty of Construction Progress and Costs." If the Company is unable
to meet the construction milestones required by any of its licenses and is
unable to obtain modifications to the milestones, the relevant license or
licenses could be revoked, which would have a material adverse effect on the
Company.
UNCERTAINTY OF CONSTRUCTION PROGRESS AND COSTS
At March 31, 1998, construction of the Company's network had passed in
excess of 51% of its final regulatory milestone requirements for all its
franchises. Successful construction and development of the Company's network
will depend on, among other things, the Company's ability to continue to
design network
23
<PAGE>
routes, install facilities, obtain and maintain any required government
licenses or approvals and finance construction and development, all in a
timely manner, at reasonable costs and on satisfactory terms and conditions.
The exact amounts and timing of all of these expenditures are subject to a
variety of factors which may vary greatly by market and be beyond the control
of the Company. Accordingly, there can be no assurance that the actual costs
of network construction will not exceed the aggregate cost of network
construction estimated under "--Need for Additional Financing" above or that
additional funding substantially in excess of that amount will not be
required.
In building its network, the Company is generally required by its licenses
to use underground construction, which is more expensive and time consuming
than aerial construction. Mechanized construction methods often cannot be used
to install network infrastructure in the Company's franchise areas due to
existing underground utility infrastructure. In addition, the Company is
responsible for restoring the surface area after its underground construction
is completed. Although the Company has recently been able to negotiate
construction contracts at rates which it believes are competitive relative to
the cable industry as a whole, construction costs could increase significantly
over the next few years as existing contracts expire and as demand for cable
construction services grows due to anticipated increases in the cable
industry's overall construction activity. Accordingly, there can be no
assurance that the Company will be able to construct its network in a timely
manner or at a reasonable cost.
POSSIBILITY OF INCREASED CUSTOMER CHURN
Although historically the Company has experienced lower rates of churn than
other operators offering similar services, there can be no assurance as to the
Company's future churn rates. Higher levels of churn could have a material
adverse effect on the Company.
SIGNIFICANT COMPETITION
The Company faces significant competition from established and new
competitors in the areas of residential telephony, business telecoms services
and cable television. The Company believes that competition will intensify in
each of these business areas, particularly business telecommunications.
Residential Telephony. The Company competes primarily with BT in providing
telephone services to residential customers. BT, formerly the only major
national PTO in the United Kingdom, has an established market presence, fully
built networks and resources substantially greater than those of the Company.
According to OFTEL, at March 31, 1997, nearly 90% of United Kingdom
residential telephone exchange line customers are customers of BT. The
Company's growth in telecommunications services, therefore, depends upon its
ability to convince BT's customers to switch to the Company's
telecommunications services. The Company believes that value for money is
currently one of the most important factors influencing the decision of United
Kingdom customers to switch from BT to a cable telecommunications service. BT
has, however, introduced price reductions in certain categories of calls and,
due to regulatory price controls, BT will be making further reductions in its
telecommunications prices. Accordingly, although the Company intends to remain
competitive, in the future it may be unable to offer residential telephone
services at rates lower than those offered by BT. In such case, the Company
may experience a decline in its average per line residential
telecommunications revenues, may not achieve desired penetration rates and may
experience a decline in total revenues. There can be no assurance that any
such decline in revenues or penetration rates will not adversely affect the of
the Company. In addition to BT, other telecommunications competitors which may
have substantially greater resources than those of the Company could prevent
the Company from increasing its share of the residential telecommunications
market.
On February 8, 1996, the DTI announced the award of two licenses to operate
radio fixed access services in the 2 GHz band. These new licenses enable the
two licensees, BT and RadioTEL Systems, to provide telecommunications services
to customers living in defined remote rural areas mainly in Scotland, Wales
and Northern Ireland and create potential additional competition for the
Company's residential telephony services in
24
<PAGE>
certain remote rural areas of the Company's Northern Ireland franchise. The
Company also competes with mobile networks. This technology could grow to
become a competitive threat to the Company's networks, particularly if call
charges are reduced further on the mobile networks. The Company's Radio
Communications group may enable the Company to benefit from the growth in this
technology. There can be no assurance, however, that the Company will be able
to compete successfully with BT or such other telecommunications operators.
The Company believes that it has a competitive advantage in the residential
market because of its ability to offer integrated telephone, CATV,
telecommunications services (including interactive and on-line services) and
dual product packages designed to encourage customers to subscribe to both
services. However, there can be no assurance that this competitive advantage
will continue. Indeed, BT, C&WC and other national PTOs will be entitled to
convey CATV services from 2001 and, subject to a review by the Director
General (which is already underway), possibly from as early as 1998.
BSkyB is currently marketing telecommunications services both independently
and on behalf of BT. BSkyB's joint marketing efforts with BT enable BSkyB's
customers to earn additional discounts on BT's residential telecommunications
volume discount plans. In addition, it has been reported from time to time
that BT and BSkyB are discussing the formation of cooperative arrangements.
Given the respective market positions of BT and BSkyB, the Company believes
that, if the two companies successfully combine their respective marketing
strengths, the resulting combination would provide significant competition to
cable operators including the Company.
Business Telecommunications. BT is also the Company's principal competitor
in providing business telecommunications services. In addition, the Company
competes with C&WC, Energis, Scottish Telecom in Scotland and with other
companies that have recently been granted telecommunications licenses such as
WorldCom and Colt. In the future, the Company may compete with additional
entrants to the business telecommunications market, such as AT&T U.K.
Competition is based on price range and quality of services, and the Company
expects price competition to intensify if C&WC, Energis and other new market
entrants compete aggressively. Most of these competitors have substantial
resources and there can be no assurance that these or other competitors will
not expand their businesses in the Company's existing markets or that the
Company will be able to continue to compete successfully with such competitors
in the business telecommunications market.
CATV. The Company's CATV systems compete with direct reception over-the-air
broadcast television, direct-to-home ("DTH") satellite services and satellite
master antenna systems. In addition, pay television and pay-per-view services
offered by the Company compete to varying degrees with other communications
and entertainment media, including home video, cinema exhibition of feature
films, live theater and newly emerging multimedia services. The Company
expects that, in the future, it may face competition from programming provided
by video-on-demand services, including those that may be provided by public
telephone operators ("PTOs") with national licenses (i.e., national PTOs).
Certain companies associated with BT and Mercury (which recently merged with
three cable operators that hold such licenses--NYNEX CableComms, Bell
Cablemedia plc and Videotron Holdings plc--to form a new company known as
Cable & Wireless Communications ("C&WC")) hold licenses to provide cable
telephone/television systems that cannot, under current ITC policy, be built
in any of the Company's franchises. This ITC policy position may change. Any
such change in policy could have a material adverse effect on the Company.
On September 29, 1993, the ITC issued a statement pursuant to which it took
the position (shared by OFTEL and DTI) that BT and the other national PTOs may
provide "video-on-demand" services under their existing licenses. No assurance
can be given that video-on-demand will not provide substantial competition to
the Company within its markets in the future.
The Broadcasting Act 1996 provides for the regulation of digital terrestrial
television ("DTT") that will initially provide an additional 18 or more new
terrestrial channels serving between 60% and 90% of the United Kingdom's
population. Some of the channels are reserved for digital simultaneous
broadcasting by the existing
25
<PAGE>
terrestrial broadcasters. The introduction of DTT, as well as digital
satellite television will provide both additional programming sources as well
as increased competition for the Company and its subsidiaries. There can be no
assurance that satisfactory (or any) terms of carriage will be obtained by the
Company for digital satellite programs or channels.
The full extent to which existing or future competitors using existing or
developing media will compete with cable television systems may not be known
for several years. There can be no assurance, however, that existing, proposed
or as yet undeveloped technologies will not become dominant in the future and
render cable television systems less profitable or even obsolete.
Broadcast Services. In February 1997, the United Kingdom Government sold the
BBC's Home Service and World Service transmission businesses to a consortium
led by Castle Tower Corporation. There can be no assurance that the Company
will not encounter significant competition from Castle Transmission for its
transmission business from expiration of the Company's current contracts with
the ITV contractors and Channel 4/S4C. See "--Dependence Upon ITV and Other
Contracts." See "--Dependence Upon Site Sharing Arrangement."
LIMITED ACCESS TO PROGRAMMING
The Company's ability to make a competitive offering of cable television
services is dependent on the Company's ability to obtain access to programming
at a reasonable cost. While various sources of programming are available to
cable system operators in the United Kingdom, BSkyB is currently the most
important supplier of cable programming and the exclusive supplier of certain
programming. BSkyB provides the industry with a range of programming,
including the most popular mainstream premium movie channels available in the
United Kingdom and, currently, exclusive English premier league soccer games.
BSkyB also competes with the Company by operating a DTH satellite service that
provides programming, including programming that is also offered by the
Company, to approximately 4 million subscribers in the United Kingdom. BSkyB's
programming is important in attracting and retaining cable television
subscribers and, in the absence of more alternative programming sources, BSkyB
may be able to set and raise prices for its programming without significant
competitive pricing pressure.
The Company, like many other cable operators, obtains most of its
programming through arrangements with BSkyB and other programming suppliers
which are not reflected in signed written agreements. To date, the Company has
not had a formal contract with BSkyB, although it has been in discussions with
BSkyB for some time. There can be no assurance that the Company will be able
to enter into a definitive agreement with BSkyB, that the terms of such
definitive agreement will not be less favorable to the Company than the
current arrangement, or that BSkyB will continue to supply programming to the
Company on reasonable commercial terms or at all. Moreover, the Company has
not, to date, entered into written contracts with many of its other program
suppliers. The loss of BSkyB or other programming, a deterioration in the
perceived quality of BSkyB or other programming, or a material increase in the
price that the Company is required to pay for BSkyB or other programming could
have a material adverse effect on the Company.
Because of the factors described in the preceding paragraphs, there can be
no assurance that its current programming will continue to be available to the
Company on acceptable commercial terms, or at all.
POSSIBLE CHANGES IN GOVERNMENT REGULATION
The principal business activities of the Company in the United Kingdom are
regulated and supervised by various governmental bodies, the ITC, the
Department of Culture, Media and Sport, the Radio Communications
Agency and OFTEL under the directions of the Director General and the DTI on
behalf of the Secretary of State for Trade and Industry. Changes in laws,
regulations or governmental policy (or the interpretations of such laws or
regulations) affecting the Company's activities and those of its competitors,
such as licensing requirements,
26
<PAGE>
changes in price regulation, deregulation of interconnection arrangements,
acceleration of the date (which is scheduled for 2001 but is subject to review
in 1998) from which BT, C&WC and other national PTOs can convey broadcast
entertainment services over their existing national networks or a change in
policy allowing more than one cable licensee in the franchise area could have
a material adverse effect on the Company. The Labour Party, which forms the
current United Kingdom Government, signalled in opposition that it was
inclined to allow the progressive entry of BT into conveyance of national
broadcast entertainment services from 1998 onwards, rather than wait until
2001, or reviewing the matter in 1998. On taking power, the new Government did
not immediately implement this policy, and British newspapers in January 1998
quoted Government sources as suggesting that it would shortly announce a
revised policy of letting BT enter the market in 2000, one year ahead of the
original timescale.
A substantial portion of the Company's business is also subject to
regulation. In particular, the prices that the Company may charge the ITV
companies, Channel 4 and S4C for television transmissions services are subject
to price controls imposed by OFTEL. On December 24, 1996, the Director General
of OFTEL issued the formal modification to the Company's Telecommunications
Act License to deal with the new price control for the television transmission
services provided by the Company to the ITV companies, Channel 4 and S4C.
Under the new arrangements, the total revenues receivable by the Company for
such services (excluding certain insignificant items) could not exceed
(Pounds)53.15 million in 1997 and, thereafter through 2002, will be adjusted
annually by the Retail Prices Index ("RPI") minus 4%. There is no assurance
that these price controls will not be reviewed again by OFTEL prior to 2002 or
that price controls for the years following December 31, 2002 will not have a
material adverse effect on the revenues receivable from the ITV companies,
Channel 4 and S4C.
As the United Kingdom is a member of the European Union ("EU"), the Company
may be subject to regulatory initiatives of the European Commission ("EC").
Changes promulgated in EU Directives, particularly to the extent that they
require an EU television "production" and "programming" quota, may reduce the
range of programs which can be offered and increase the costs of purchasing
television programming. In addition, EU Directives may introduce provisions
requiring the Company and its subsidiaries to provide access to its cable
network infrastructure to other service providers, which could have a material
adverse effect on the Company.
DEPENDENCE UPON SITE SHARING ARRANGEMENT
As a result of, among other factors, a natural shortage of potential
transmission sites and the difficulties in obtaining planning permission for
erection of further masts, Castle Transmission (as successor to the British
Broadcasting Corporation (the "BBC")) and the Company have made arrangements
to share a large number of sites. Under the present arrangements, one of the
parties (the "Station Owner") is the owner, lessee or licensee of each site
and the other party (the "Sharer") is entitled to request a license to use
certain facilities at that site. Each site license granted pursuant to the
site sharing agreement is for an initial period expiring on December 31, 2005
(subject to title and to the continuation in force of the site sharing
agreement) and provides that, if requested by the Sharer, it will be extended
for further periods. The site sharing agreement and each site license provide
for the Station Owner to be paid a commercial license fee and for the Sharer
to be responsible, in normal circumstances, for the costs of accommodation and
equipment used exclusively by it. Either party may terminate the agreement by
5 years' notice in writing to the other expiring on December 31, 2005 or at
any date which is a date 10 years or a multiple of 10 years after December 31,
2005. Although the Company does not anticipate that the site sharing agreement
or the site licenses will be terminated, there can be no assurance that such a
termination will not occur. Termination of the site sharing arrangements would
have a material adverse effect on the Company's business.
DEPENDENCE UPON ITV AND OTHER CONTRACTS
The Company's broadcast services business is substantially dependent upon
contracts with the ITV contractors, Channel 4/S4C and Vodafone for the
provision of transmission services. The prices that the
Company may charge these companies for television transmission services are
subject to regulation by OFTEL. See "--Possible Changes in Government
Regulation." The contracts with the ITV contractors and Channel
27
<PAGE>
4/S4C terminate on December 31, 2002. Although, historically, the ITV
contractors and Channel 4/S4C have renewed their contracts with the Company,
there can be no assurance that they will do so upon expiration of the current
contracts, that they will not negotiate terms for the Company's provision of
transmission services on a basis less favorable to the Company or that they
would not seek to obtain from third parties a portion of the transmission
services currently provided by the Company. The loss of any one of these
contracts could have a material adverse effect on the Company.
MANAGEMENT OF GROWTH AND EXPANSION
The Company has experienced rapid growth and development in a relatively
short period of time and plans to continue to do so to meet its strategic
objectives and regulatory milestones. The management of such growth will
require, among other things, stringent control of construction and other
costs, continued development of the Company's financial and management
controls, increased marketing activities and the training of new personnel.
Failure to manage its rapid growth and development successfully could have a
material adverse effect on the Company.
DEPENDENCE ON KEY PERSONNEL
The Company's businesses are managed by a small number of key executive
officers, the loss of one or more of whom could have a material adverse effect
on the Company. The Company believes that its future success will depend in
large part on its continued ability to attract and retain highly skilled and
qualified personnel. The Company has not entered into written employment
contracts or non-compete agreements with, nor has it obtained life insurance
policies covering, such key executive officers. Certain senior managers of the
Company also serve as members of senior management of other companies in the
telecommunications business.
RAPID TECHNOLOGICAL CHANGES
The telecommunications industry is subject to rapid and significant changes
in technology and the effect of technological changes on the businesses of the
Company cannot be predicted. However, the cost of implementation of emerging
and future technologies could be significant, and the Company's ability to
fund such implementation will depend on its ability to obtain additional
financing. See "--Need for Additional Financing."
CURRENCY RISK
To the extent that the Company obtains financing in United States dollars
and incurs construction and operating expenses in British pounds sterling, it
will encounter currency exchange rate risks. In addition, the Company's
revenues are generated primarily in British pounds sterling while its interest
and principal obligations with respect to most of the Company's existing
indebtedness are payable in United States dollars. While the Company may
consider entering into transactions to hedge the risk of exchange rate
fluctuations, there can be no assurance that the Company will engage in such
transactions, or, if the Company decides to engage in such transactions, that
they will be successful and that shifts in the currency exchange rates will
not have a material adverse effect on the Company.
SUBSTITUTION OF CURRENCY
Although there can be no assurance that a single European currency will be
adopted or, if adopted, on what time schedule, the Treaty on the European
Economic and Monetary Union provides for the introduction of the Euro in
substitution for the national currencies of the member states which adopt the
Euro. If the United Kingdom adopts the Euro, the regulations of the European
Commission relating to the Euro shall apply to each of the Sterling Senior
Notes, the Sterling Deferred Coupon Notes, the Sterling Senior Notes Indenture
and the Sterling Deferred Coupon Notes Indenture. The circumstances and
consequences described in this paragraph entitle neither the Company nor any
holder of the Sterling Senior Notes or Sterling Deferred Coupon Notes to early
redemption, rescission, notice or repudiation of the terms and conditions of
the Sterling Senior Notes or Sterling Deferred Coupon Notes or the applicable
Indentures or to raise other defenses or to request any compensation claim,
nor will they affect any of the other obligations of the Company under the
Sterling Senior Notes or Sterling Deferred Coupon Notes and the applicable
Indentures.
28
<PAGE>
INSURANCE COVERAGE
The Company obtains insurance of the type and in the amounts that it
believes are customary in the United Kingdom for similar companies. Consistent
with this practice, the Company does not insure the underground portion of its
cable network. Any catastrophe affecting a significant portion of the
Company's underground cable network could result in substantial uninsured
losses.
LACK OF PUBLIC MARKET FOR THE NOTES
The Old Notes were offered to a small number of institutional buyers and are
eligible for trading in the PORTAL Market. The New Notes will be a new issue
of securities in which there is no existing trading market. Although the
Initial Purchasers have informed the Company that they currently intend to
make a market in the New Notes, they are not obligated to do so and any such
market making may be discontinued at any time without notice. The Company does
not intend to apply for listing for the New Notes on any securities exchange
(other than the Luxembourg Stock Exchange) or to seek approval for quotation
through any automated quotation system. Accordingly, there can be no assurance
as to the ongoing development or liquidity of any market for the New Notes. If
an active public market for the New Notes does not develop or is interrupted,
the market price and liquidity of the New Notes may be adversely affected.
FORWARD-LOOKING STATEMENTS
This Prospectus includes certain projections of broadcast transmission
revenues, build-out results and other forward-looking statements, including
those using words such as "believe," "anticipate," "should," "intend," "plan,"
"will," "expects," "estimates," "projects," "positioned," "strategy," and
similar expressions; in reviewing such information it should be kept in mind
that actual results may differ materially from those in such projections and
forward-looking statements. Important assumptions and factors that could cause
actual results to differ materially from those contemplated or projected,
forecast, estimated or budgeted in or expressed or implied by such projections
and forward-looking statements include those specified in this Risk Factors
section, as well as industry trends, the Company's ability to continue to
design network routes, install facilities, obtain and maintain any required
government licenses or approvals and finance construction and development, all
in a timely manner, at reasonable costs and on satisfactory terms and
conditions, as well as assumptions about customer acceptance, churn rates,
overall market penetration and competition from providers of alternative
services, and availability, terms and deployment of capital. The Company
assumes no obligation to update projections or other forward-looking
statements to reflect actual funding requirements, capital expenditures and
results, changes in assumptions or in the factors affecting such projections
or other forward-looking statements. There can be no assurance that: (i) any
financings will be obtained when required, on acceptable terms or at all; (ii)
the Company or its subsidiaries will be able to access all amounts available
under the terms of the New Credit Facility or other financings; (iii) actual
amounts required to complete the Company's planned build out will not
exceed the amount estimated above (see "--Uncertainty of Construction Progress
and Costs") or that additional financing substantially in excess of that
amount will not be required; (iv) conditions precedent to advances under the
New Credit Facility will be satisfied when funds are required; (v) the Company
will not acquire franchises, licenses or other new businesses (in addition to
the proposed Amalgamation) that would require additional capital; (vi)
operating cash flow will meet expectations or that the Company will be able to
access such cash from its subsidiaries' operations to meet any unfunded
portion of its capital requirements when required or to satisfy the terms of
the Notes, the Existing Notes, the Convertible Notes or the Company's other
debt instruments and agreements for the incurrence of additional debt
financing (see"--Holding Company Structure; Dependence Upon Cash Flow from
Subsidiaries"); (vii) the Company's subsidiaries will not incur losses from
their exposure to exchange rate fluctuations or be adversely affected by
interest rate fluctuations (see "--Currency Risk"); (viii) there will not be
adverse changes in applicable United States or United Kingdom tax laws; or
(ix) the effects of monetary union in Europe, when achieved, will not be
materially adverse to the Company. All forward-looking statements in this
Prospectus are expressly qualified by the foregoing.
29
<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
The Old Notes were sold by the Company to the Initial Purchasers on March
13, 1998 pursuant to a Purchase Agreement, dated March 6, 1998. Upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal (which together constitute the Exchange
Offer), the Company will accept for exchange Old Notes which are properly
tendered on or prior to the Expiration Date and not withdrawn as permitted
below. As used herein, the term "Expiration Date" means 5:00 p.m., New York
City time, on 1998; provided however, that if the Company, in its sole
discretion, has extended the period of time for which the Exchange Offer is
open, the term "Expiration Date" means the latest time and date to which the
Exchange Offer is extended.
As of the date of this Prospectus, (Pounds)125,000,000 aggregate principal
amount of the Old Sterling Senior Notes, (Pounds)300,000,000 aggregate
principal amount at maturity of the Old Sterling Deferred Coupon Notes and
$1,300,000,000 aggregate principal amount at maturity of the Old USD Deferred
Coupon Notes were outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about the date of this Prospectus, to
all Holders of Old Notes known to the Company. The Company's obligation to
accept Old Notes for exchange pursuant to the Exchange Offer is subject to
certain conditions as set forth under "Certain Conditions to the Exchange
Offer" below.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the Holders thereof. During any such
extension, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Old Notes
not accepted for exchange for any reason will be returned without expense to
the tendering Holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 or (Pounds)1,000, as applicable, and any integral
multiple thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions of the Exchange
Offer specified below under "Certain Conditions to the Exchange Offer." The
Company will give oral or written notice of any extension, amendment, non-
acceptance or termination to the Holders of the Old Notes as promptly as
practicable, such notice in the case of any extension to be issued by means of
a press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a Holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal in respect of the applicable Old Notes, as the case may
be. Except as set forth below, a Holder (which term, for purposes of the
Exchange Offer, includes any participant in the Book-Entry Transfer Facility
(as defined) system whose name appears on a security position listing as the
holder of such Old Notes) who wishes to tender Old Notes for exchange pursuant
to the Exchange Offer must transmit the Letter of Transmittal, properly
completed and duly executed, including all other documents required by such
Letter of Transmittal or (in the case of a book-entry transfer) an Agent's
Message in lieu of such Letter of Transmittal to The Chase Manhattan Bank (the
"Exchange Agent") at one of the addresses set forth below under "Exchange
Agent", on or prior to the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal prior to the Expiration Date, (ii) a timely
confirmation of a book-entry
30
<PAGE>
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the appropriate Exchange Agent's account at DTC (the "Book-
Entry Transfer Facility") pursuant to the procedure for book-entry transfer
described below, must be received by the Exchange Agent prior to the
Expiration Date along with the Letter of Transmittal or an Agent's Message in
lieu of a Letter of Transmittal, or (iii) the Holder must comply with the
guaranteed delivery procedures described below. The term "Agent's Message"
means a message, transmitted by the Book-Entry Transfer Facility to and
received by the appropriate Exchange Agent and forming a part of a Book-Entry
Confirmation, which states that the Book-Entry Transfer Facility has received
an express acknowledgment from the tendering participant, which acknowledgment
states that such participant has received and agrees to be bound by, and make
the representations and warranties contained in, the appropriate Letter of
Transmittal and that the Company may enforce such Letter of Transmittal
against such participant.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES
SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a Holder of the Old Notes who has not
completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust
company having an office or correspondent in the United States or by such
other Eligible Institution within the meaning of Rule 17 (A)(d)-15 of the
Exchange Act (collectively, "Eligible Institutions"). If Old Notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Old Notes surrendered for exchange must be endorsed by, or be
accompanied by a written instrument or instruments of transfer, or exchange,
in satisfactory form as determined by the Company in its sole discretion, duly
executed by the registered Holder with the signature thereon guaranteed by an
Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Note not properly tendered or to not accept any
particular Old Note which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to
waive any defects or irregularities or conditions of the Exchange Offer as to
any particular Old Note either before or after the Expiration Date (including
the right to waive the ineligibility of any Holder who seeks to tender Old
Notes in the Exchange Offer). The interpretation of the terms and conditions
of the Exchange Offer as to any particular Old Note either before or after the
Expiration Date (including the appropriate Letter of Transmittal and the
instructions thereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Old Notes for exchange must be cured within such reasonable period
of time as the Company shall determine. Neither the Company, the Exchange
Agent nor any other person shall be under any duty to give notification of any
defect or irregularity with respect to any tender of Old Notes for exchange,
nor shall any of them incur any liability for failure to give such
notification.
If a Letter of Transmittal is signed by a person or persons other than the
registered Holder or Holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered Holder or Holders that appear on the
Old Notes.
If a Letter of Transmittal or any Old Notes or powers of attorney are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or
31
<PAGE>
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted with the Letter of Transmittal.
By tendering, each Holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder, that neither the Holder nor
any such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes and that neither the Holder
nor any such other person is an "affiliate," as defined under Rule 405 of the
Securities Act, of the Company. If any Holder is an affiliate of the Company,
is engaged in or intends to engage in or has any arrangement with any person
to participate in the distribution of the New Notes to be acquired pursuant to
the Exchange Offer, such Holders (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer who holds Old Notes
acquired for its own account as a result of market-making activities or other
trading activities, and who receives New Notes in exchange for such Old Notes
pursuant to the Exchange Offer, may be an "underwriter" within the meaning of
the Securities Act and must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale
of such New Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered, issue the New Notes promptly after acceptance of the Old
Notes and cause the New Notes to be authenticated by the Trustee. See "Certain
Conditions to the Exchange Offer" below. For purposes of the Exchange Offer,
the Company shall be deemed to have accepted properly tendered Old Notes for
exchange when, as and if the Company has given oral (promptly confirmed in
writing) or written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note of the same class having a principal amount at maturity
equal to that of the surrendered Old Note. If the Exchange Offer is not
consummated by January 17, 1999, special interest will accrue (in addition, in
the case of the Old Sterling Senior Notes, to the stated interest on the Old
Sterling Senior Notes and, in the case of the Old Sterling Deferred Coupon
Notes and the Old USD Deferred Coupon Notes, in addition to the amortization
of original issue discount and stated interest) from and including January 18,
1999. Special interest, if any, will be payable in cash semiannually in
arrears each April 1 and October 1, respectively, to holders of record of the
Old Notes on the immediately preceding March 15 and September 15,
respectively, at a rate per annum equal to 0.50% of the principal amount of
the Old Sterling Senior Notes or the Accreted Value of the Old Sterling
Deferred Coupon Notes or the Old USD Deferred Coupon Notes, as applicable
(determined daily). The aggregate amount of special interest payable pursuant
to the above provisions will in no event exceed 1.50% per annum of the
principal amount of the Old Sterling Senior Notes or the Accreted Value of the
Old Sterling Deferred Coupon Notes or the Old USD Deferred Coupon Notes, as
applicable (determined daily). Upon the consummation of the Exchange Offer
after January 17, 1999, the special interest payable on the Old Notes from the
date of such consummation will cease to accrue and all accrued and unpaid
special interest as of the consummation of the Exchange Offer shall be paid
promptly thereafter to the holders of record of the Old Notes immediately
prior to the time of such occurrence. Following the consummation of the
Exchange Offer the interest terms shall revert to the original terms set forth
in the Notes.
The New Sterling Senior Notes will bear interest from the most recent date
to which interest has been paid on the Old Sterling Senior Notes or, if no
interest has been paid on the Old Sterling Senior Notes, from March 13, 1998.
Accordingly, if the relevant record date for interest payment occurs after the
consummation of the
32
<PAGE>
Exchange Offer, registered holders of New Sterling Senior Notes on such record
date will receive interest accruing from the most recent date to which
interest has been paid or, if no interest has been paid, from March 13, 1998.
If, however, the relevant record date for interest payment occurs prior to the
consummation of the Exchange Offer, registered holders of Old Sterling Senior
Notes on such record date will receive interest accruing from the most recent
date to which interest has been paid or, if no interest has been paid, from
March 13, 1998. Old Sterling Senior Notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange Offer,
except as set forth in the immediately preceding sentence. Holders of Old
Sterling Senior Notes whose Old Sterling Senior Notes are accepted for
exchange will not receive any payment in respect of interest, if any, on such
Old Sterling Senior Notes otherwise payable on any interest payment date the
record date for which occurs on or after consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-
Entry Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, the Letter of Transmittal properly completed and
duly executed or an Agent's Message in lieu thereof and all other required
documents. If any tendered Old Notes are not accepted for any reason set forth
in the terms and conditions of the Exchange Offer or if Old Notes are
submitted for an amount or quantity greater than the Holder desires to
exchange, such unaccepted or non-exchanged Old Notes will be returned without
expense to the tendering Holder thereof (or, in the case of Old Notes tendered
by book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book-entry procedures described below, such
non-exchanged Old Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration
or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will request the establishment of accounts with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus
unless the Exchange Agent already has established an account with the Book-
Entry Transfer Facility suitable for the Exchange Offer, and any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing the Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for transfer.
ALTHOUGH DELIVERY OF OLD NOTES MAY BE EFFECTED THROUGH BOOK-ENTRY TRANSFER
AT THE BOOK-ENTRY TRANSFER FACILITY, THE LETTER OF TRANSMITTAL (OR A FACSIMILE
THEREOF), WITH ANY REQUIRED SIGNATURE GUARANTEES OR AN AGENT'S MESSAGE IN LIEU
THEREOF AND ANY OTHER REQUIRED DOCUMENTS, MUST, IN ANY CASE, BE TRANSMITTED TO
AND RECEIVED BY THE EXCHANGE AGENT AT ONE OF THE ADDRESSES SET FORTH BELOW
UNDER "EXCHANGE AGENT," AS THE CASE MAY BE, ON OR PRIOR TO THE EXPIRATION DATE
OR THE GUARANTEED DELIVERY PROCEDURES DESCRIBED BELOW MUST BE COMPLIED WITH.
GUARANTEED DELIVERY PROCEDURES
If a Holder of the Old Notes desires to tender such Old Notes and the Old
Notes are not immediately available, or time will not permit such Holder's Old
Notes or other required documents to reach the Exchange Agent before the
Expiration Date, or the procedure for book-entry transfer cannot be completed
on a timely basis, a tender may be effected if (i) the tender is made through
an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent
received from such Eligible Institution the appropriate Notice of Guaranteed
delivery, substantially in the form provided by the Company (by telegram,
telex, facsimile transmission, mail or hand delivery), setting forth the name
and address of the Holder of Old Notes and the amount of Old Notes tendered,
stating that the tender is being made thereby and guaranteeing that within
five New York Stock Exchange ("NYSE") trading days after the
33
<PAGE>
date of execution of the Notice of Guaranteed Delivery, the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof or Agent's Message
in lieu thereof) with any required signature guarantees, and any other
documents required by the appropriate Letter of Transmittal will be deposited
by the Eligible Institution with the Exchange Agent and (iii) the certificates
for all physically tendered Old Notes, in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, together with a properly completed and
duly executed appropriate Letter of Transmittal (or facsimile thereof or
Agent's Message in lieu thereof) with any required signature guarantees, and
all other documents required by the Letter of Transmittal, are received by the
Exchange Agent within five NYSE trading days after the date of execution of
the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the addresses set forth below under
"Exchange Agent". Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes
to be withdrawn (including the principal amount in the case of Old Sterling
Senior Notes or the principal amount at maturity in the case of the Old
Sterling Deferred Coupon Notes or the Old USD Deferred Coupon Notes), and
(where certificates for Old Notes have been transmitted) specify the name in
which such Old Notes are registered, if different from that of the withdrawing
Holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent then, prior to the release of such
certificates the withdrawing Holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, the executed notice of
withdrawal, guaranteed by an Eligible Institution, unless such Holder is an
Eligible Institution, must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes which have been tendered for exchange but which are not exchanged for
any reason will be returned to the Holder thereof without cost to such Holder
(or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for
the Old Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "--Procedures
for Tendering Old Notes" above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
the Old Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Old Notes for exchange or the exchange of the
New Notes for such Old Notes any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (ii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of
the Old Notes pursuant to the Exchange Offer,
34
<PAGE>
or any statute, rule, regulation, order or injunction shall be sought,
proposed, introduced, enacted, promulgated or deemed applicable to the
Exchange Offer or any of the transactions contemplated by the Exchange
Offer by any government or governmental authority, domestic or foreign, or
any action shall have been taken, proposed or threatened, by any
government, governmental authority, agency or court, domestic or foreign,
that in the sole judgment of the Company might directly or indirectly
result in any of the consequences referred to in clauses (i) or (ii) above
or, on the sole judgement of the Company, might result in the holders of
New Notes having obligations with respect to resales and transfers of New
Notes which are greater than those described in the interpretation of the
Commission referred to on the cover page of this Prospectus, or would
otherwise make it inadvisable to proceed with the Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the issuer to complete the transactions contemplated by the
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
reasonable judgment of the Company, is or may be adverse to the Company, or
the Company shall have become aware of facts that, in the reasonable
judgment of the Company, have or may have adverse significance with respect
to the value of the Old Notes or the New Notes;
which, in the reasonable judgment of the Company in any case, and regardless
of the circumstances (including any action by the Company) giving rise to any
such condition, makes it inadvisable to proceed with the Exchange Offer and/or
with such acceptance or exchange or with such exchange.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its sole discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus constitutes a part or
the qualification of the Indentures under the Trust Indenture Act of 1939, as
amended (the "TIA").
35
<PAGE>
EXCHANGE AGENT
The Chase Manhattan Bank (the "Exchange Agent") has been appointed as the
Exchange Agent in respect of the Notes for the Exchange Offer. All executed
Letters of Transmittal in respect of the Notes should be directed to the
Exchange Agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal in respect of the Notes and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
Delivery To: The Chase Manhattan Bank, as Exchange Agent
In New York
By Mail, By Hand and Overnight By Facsimile:
Courier: (212) 638-7380
The Chase Manhattan Bank (212) 638-7381
Corporate Trust-Securities Window
Room 234--North Building Confirm by Telephone:
55 Water Street Carlos Esteves: (212) 638-0828
New York, New York 10041 : (212) 638-0454
In Luxembourg
By Mail, By Hand and Overnight By Facsimile:
Courier: (352) 46 26 85 380
Chase Manhattan Bank Luxembourg S.A.
5 Rue Plaetis Confirm by Telephone:
L-2338, Luxembourg
Veronique Cridel: (352) 46 26 85 284
DELIVERY OF THE LETTER OF TRANSMITTAL IN RESPECT OF THE NOTES TO AN ADDRESS
OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL
.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer except for reimbursement of
mailing expenses.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
$250,000.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes
not tendered or not accepted in the Exchange Offer be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject, to the provisions
in the applicable Indenture regarding transfer and exchange of the Old Notes
and the restrictions on transfer of such Old Notes as set forth in the legend
on the Old Notes and as described in the Offering Memorandum as a consequence
of the issuance of such Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and
applicable state securities laws. In general, the Old Notes may not be offered
or sold, unless registered under the
36
<PAGE>
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will take any action to register
the Old Notes under the Securities Act.
Based on interpretations by the staff of the Commission, as set forth in no-
action letters issued to third parties, the Company believes that New Notes
issued in exchange of Old Notes, pursuant to the Exchange Offer may be offered
for resale, resold or otherwise transferred by Holders thereof (other than any
such Holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such Holders' business and such
Holders, other than brokers-dealers, are not engaged in, do not intend to
engage in and have no arrangement or understanding with any person to
participate in, the distribution (within the meaning of the Securities Act) of
such New Notes. If any Holder has any arrangement or understanding with
respect to the distribution of the New Notes to be acquired pursuant to the
Exchange Offer, such Holder (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes must acknowledge that such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities and that it will deliver a prospectus
in connection with any resale of such New Notes. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company
does not currently intend to take any action to register or qualify the sale
of the New Notes in any such jurisdictions.
37
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the exchange of Old
Notes for New Notes pursuant to the Exchange Offer. The Company intends to use
the approximately $1.25 billion net proceeds to the Company from the sale of
the Old Notes to finance the construction, capital expenditure and working
capital requirements (including, without limitation, debt service and
repayment obligations) of the Company and, potentially, refinance existing
indebtedness. In addition a portion of the net proceeds may also be used to
make acquisitions of businesses or assets related to the Company's cable
telephony/television and telecommunications business.
EXCHANGE RATES
The following table sets forth, for the periods indicated, the Noon Buying
Rate for pounds sterling expressed in U.S. dollars per (Pounds)l.00.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD END AVERAGE(1) HIGH LOW
<S> <C> <C> <C> <C>
1988................................... $1.81 $1.78 $1.91 $1.66
1989................................... 1.61 1.63 1.82 1.51
1990................................... 1.93 1.79 1.98 1.59
1991................................... 1.87 1.76 2.00 1.60
1992................................... 1.51 1.76 2.00 1.51
1993................................... 1.48 1.50 1.59 1.42
1994................................... 1.57 1.53 1.64 1.46
1995................................... 1.55 1.58 1.64 1.53
1996................................... 1.71 1.56 1.72 1.49
1997................................... 1.65 1.64 1.71 1.56
1998 (through June 3).................. 1.64 1.63 1.69 1.61
</TABLE>
---------------------
(1) The average of the Noon Buying Rates on the last day of
each month during the relevant period.
38
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1998.
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------
(IN THOUSANDS)
<S> <C>
Cash, cash equivalents and marketable securities........... $1,253,290
==========
Long-term debt:
New Credit Facility(1)................................... --
9 1/2% Notes due 2008.................................... 208,275
10 3/4% Deferred Coupon Notes due 2008................... 295,318
9 3/4% Deferred Coupon Notes due 2008.................... 805,689
10 7/8% Notes Due 2003................................... 200,142
12 3/4% Notes Due 2005................................... 215,889
11 1/2% Notes Due 2006................................... 765,154
10% Notes Due 2007 ...................................... 400,000
7 1/4% Convertible Subordinated Notes Due 2005(2)........ 191,750
7% Convertible Subordinated Notes Due 2008............... 275,000
----------
Total long-term debt................................... 3,357,217
Senior redeemable exchangeable preferred stock, par value
$0.01 per share, plus accreted dividends; liquidation
preference $107,000,000; 114,000 shares issued and
outstanding............................................... 112,250
Shareholders' (deficiency):
Series preferred stock, $.01 par value, 2,500,000 shares
authorized:
Series A preferred stock, $.01 par value, liquidation
preference $78,000,000; 2,000 shares authorized, 780
shares issued and outstanding(3)...................... --
Common stock, $.01 par value, 100,000,000 shares
authorized, 32,302,000 shares issued and
outstanding(4).......................................... 323
Additional paid-in capital............................... 536,279
Accumulated other comprehensive income................... 135,333
(Deficit)................................................ (810,724)
----------
Total shareholders' (deficiency)....................... (138,789)
----------
Total capitalization....................................... $3,330,678
==========
</TABLE>
- ---------------------
(1) In August 1997, NTL (UK) Group, Inc., a wholly-owned subsidiary of the
Company, which is the holding company for the United Kingdom operations
and the parent company of NTLIH, and NTLIH entered into an agreement with
The Chase Manhattan Bank pursuant to which Chase has agreed to fully
underwrite an (Pounds)555,000,000, eight-year term loan facility with an
initial four-year revolving period (the "New Credit Facility"). Chase has
provided a portion of the New Credit Facility in the form of a
(Pounds)350,000,000 facility pursuant to which no amount has been borrowed
as of May 28, 1998. Chase's commitment under the New Credit Facility will
be further reduced to no less than (Pounds)480 million by April 14, 1999.
See "Description of Certain Indebtedness--The New Credit Facility."
(2) In April 1998, the 7 1/4% Convertible Notes were converted into
approximately 6,957,500 shares of Common Stock.
(3) In May 1998, the Series A Preferred Stock was converted into 1,950,000
shares of Common Stock.
(4) Does not include an aggregate of 33,001,500 shares of Common Stock,
consisting of: (i) 15,857,000 shares of Common Stock subject to options;
(ii) 976,000 shares of Common Stock subject to warrants, (iii) 7,261,000
shares of Common Stock issuable upon conversion of the 7% Convertible
Notes, (iv) 6,957,500 shares of Common Stock issuable upon conversion of
the 7 1/4% Convertible Notes (see Note 2) and (v) 1,950,000 shares of
Common Stock issuable upon conversion of the Series A Preferred Stock (see
Note 3).
39
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY
The selected consolidated financial information of the Company presented
below under the captions Income Statement Data for the years ended December
31, 1997, 1996, 1995, 1994 and 1993 and Balance Sheet Data as of December 31,
1997, 1996, 1995, 1994 and 1993, were derived from the Consolidated Financial
Statements of the Company audited by Ernst & Young LLP. The following
information should be read in conjunction with the Consolidated Financial
Statements of the Company and the related notes included herein.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ ---------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
(IN THOUSANDS, EXCEPT PER RATIO AND SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................ $147,792 $106,817 $ 491,775 $ 228,343 $ 33,741 $ 13,745 $ 10,078
Costs and expenses
Operating expenses..... 77,333 70,756 301,644 144,315 24,415 7,827 4,441
Selling, general and
administrative
expenses............... 56,728 38,317 169,133 114,992 57,932 19,468 2,685
Depreciation and
amortization........... 45,856 33,005 150,509 98,653 29,823 17,916 6,206
Franchise fees......... 6,195 5,872 23,587 13,117 -- -- --
Corporate expenses..... 3,642 4,098 18,324 14,899 14,697 8,422 2,357
Nonrecurring charges... -- -- 20,642 -- -- -- --
-------- -------- --------- --------- --------- -------- --------
Total costs and
expenses............ 189,754 152,048 683,839 385,976 126,867 53,633 15,689
-------- -------- --------- --------- --------- -------- --------
Operating income
(loss)................ (41,962) (45,231) (192,064) (157,633) (93,126) (39,888) (5,611)
Other income (expense)
Interest, dividend and
other income........... 5,143 7,401 28,415 33,634 21,185 18,403 5,182
Interest expense....... (58,058) (47,609) (202,570) (137,032) (28,379) (11,410) (2,950)
Other gains............ -- -- 21,497 -- -- -- --
Foreign currency
transactions gains
(losses)............... 1,205 (322) 574 2,408 84 2,062 (7,052)
-------- -------- --------- --------- --------- -------- --------
Income (loss) before
income taxes, minority
interests and
extraordinary item..... (93,672) (85,761) (344,148) (258,623) (100,236) (30,833) (10,431)
Income tax benefit
(provision)............. -- -- 15,591 (7,653) 2,477 (1,630) (645)
-------- -------- --------- --------- --------- -------- --------
Income (loss) before
minority interests and
extraordinary item...... (93,672) (85,761) (328,557) (266,276) (97,759) (32,463) (11,076)
Minority interests...... -- -- -- 11,822 6,974 2,890 --
Loss from early
extinguishment of debt.. -- -- (4,500) -- -- -- --
-------- -------- --------- --------- --------- -------- --------
Net income (loss)....... $(93,672) $(85,761) $(333,057) $(254,454) $ (90,785) $(29,573) $(11,076)
======== ======== ========= ========= ========= ======== ========
Net income (loss) per
common share--basic and
diluted(1)............. $ (3.02) $ (2.73) $ (10.74) $ (8.20) $ (3.01) $ (.98) $ (.83)
======== ======== ========= ========= ========= ======== ========
Weighted average number
of common shares used
in computation of net
income (loss) per
share(1)............... 32,250 32,084 32,117 31,041 30,190 30,175 13,327
Ratio of earnings to
fixed charges(2)....... -- -- -- -- -- -- --
OTHER DATA:
Capital expenditures.... $ 97,945 $120,585 $ 503,656 $ 505,664 $ 445,550 $122,962 $ 7,612
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, AS OF DECEMBER 31,
---------- -------------------------------------------------------
1998 1997 1996 1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $1,169,699 $ 98,902 $ 445,884 $ 175,283 $294,602 $400,097
Working capital......... 1,090,656 (51,916) 242,102 76,128 251,544 410,421
Fixed assets, net....... 1,853,181 1,756,985 1,459,528 639,674 191,725 36,422
Total assets............ 3,694,951 2,421,639 2,454,611 1,010,669 664,366 594,976
Long-term debt ......... 3,357,217 2,015,057 1,732,168 513,026 143,488 130,553
Redeemable Preferred
Stock.................. 112,250 108,534 -- -- -- --
Paid-in capital......... 536,602 538,376 548,968 462,525 462,423 462,392
Shareholders' equity
(deficiency)........... (138,789) (61,668) 328,114 339,257 436,534 452,402
</TABLE>
- ---------------------
(1) After giving retroactive effect to the four-for-three stock split by way
of stock dividend paid in August 1995. For the year ended December 31,
1997, net income (loss) per common share was $10.60 before extraordinary
item.
(2) Fixed charges consist of interest expense, including capitalized interest,
amortization of fees related to debt financing and rent expense deemed to
be interest. The fixed charges coverage deficiency amounted to $94.6
million, $355.4 million, $257.1 million, $105.4 million, $31.8 million and
$10.4 million for the three months ended March 31, 1998 and for the years
ended December 31, 1997, 1996, 1995, 1994 and 1993, respectively. For the
three months ended March 31, 1998 and for the year ended December 31,
1997, the Company's earnings were insufficient to cover combined fixed
charges and preferred stock dividends by $98.2 million and $367.4 million.
The Company did not declare or pay any cash dividends during the years
indicated.
40
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The unaudited pro forma financial data presented herein gives effect to the
Amalgamation through which the Company will acquire all of the outstanding
capital stock of Partners. The pro forma financial data is based on the
historical financial statements of Partners and the Company. The balance sheet
data reflects the translation of all UK (Pounds) denominated amounts at the
March 31, 1998 rate of $1.6717 = (Pounds)1.00 The statements of operations
data reflects the translation of all UK (Pounds) denominated amounts at the
average rate for the three months ended March 31, 1998 and the year ended
December 31, 1997 of $1.6459 = (Pounds)1.00 and $1.638 = (Pounds)1.00,
respectively.
The Amalgamation has been accounted for in the pro forma financial data
using the purchase method of accounting. Accordingly, Partners' assets
acquired and liabilities assumed have been recorded at their estimated fair
values, which are subject to further adjustment based upon appraisals and
other analyses, with appropriate recognition given to the Company's income tax
rates.
Partners currently owns the Birmingham Cable Equity Interest and the Cable
London Equity Interest. Partners accounts for the Equity Interests using the
equity method. The following pro forma financial data gives effect to four of
the possible outcomes depending upon whether TeleWest determines to exercise
either or both of the Purchase Rights: (i) Partners retains both Equity
Interests; (ii) Partners retains the Cable London Equity Interest but not the
Birmingham Cable Equity Interest; (iii) Partners retains the Birmingham Cable
Equity Interest but not the Cable London Equity Interest; and (iv) Partners
does not retain either Equity Interest. The pro forma financial data assumes
that (i) the Purchase Rights are either resolved or exercised as of the
Determination Time and (ii) if either or both of the Purchase Rights are
exercised, the relevant Equity Interest proceeds will be paid by the Company
in cash and not in shares of the Company's Common Stock.
The consummation of the Amalgamation requires the consent of certain third
parties. The pro forma financial data assumes that such consents will be
obtained. In the event that the Company or Partners makes cash payments or
gives other consideration in exchange for consents, the consideration will be
accounted for as additional deferred financing costs and amortized over the
remaining term of the debt.
The pro forma financial data does not give effect to the issuance by the
Company in March 1998 of the Old Notes, for which the Company received net
proceeds of approximately $1.25 billion after discounts, commissions and
expenses. Interest expense would have increased by $29.4 million and $131.4
million for the three months ended March 31, 1998 and the year ended December
31, 1997, respectively.
The unaudited pro forma condensed combined statement of operations for the
three months ended March 31, 1998 and for the year ended December 31, 1997
gives effect to the Amalgamation as if it had been consummated on January 1,
1997. The unaudited pro forma condensed combined balance sheet as of March 31,
1998 gives effect to the Amalgamation as if it had been consummated on March
31, 1998.
The pro forma adjustments are based upon available information and
assumptions that management of the Company and Partners believes are
reasonable at the time made. The unaudited pro forma condensed combined
financial statements do not purport to present the financial position or
results of operations of the Company had the Amalgamation occurred on the
dates specified, nor are they necessarily indicative of the financial position
or results of operations that may be achieved in the future. The unaudited pro
forma condensed combined statements of operations do not reflect any
adjustments for synergies that the Company expects to realize commencing upon
consummation of the Amalgamation. No assurances can be made as to the amount
of cost savings or revenue enhancements, if any, that may be realized.
The unaudited pro forma financial statements should be read in conjunction
with the consolidated financial statements and notes of the Company and the
consolidated financial statements and notes of Partners, appearing elsewhere
in this Prospectus.
41
<PAGE>
NTL INCORPORATED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA ADJUSTMENTS
NTL PARTNERS PRO FORMA TO REMOVE WITHOUT TO REMOVE WITHOUT TO REMOVE
(HISTORICAL) (HISTORICAL) ADJUSTMENTS (ASSUMING ALL) LONDON LONDON BIRMINGHAM BIRMINGHAM BOTH
------------ ------------ ----------- -------------- ----------- --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES........ $147,792 $ 28,928 $ -- $ 176,720 $(201)D $ 176,519 $ (250)D $ 176,470 $ (451)D
COSTS AND
EXPENSES
Operating
expenses....... 77,333 9,317 86,650 86,650 86,650
Selling, general
and
administrative
expenses....... 56,728 13,972 70,700 70,700 70,700
Franchise fees.. 6,195 6,195 6,195 6,195
Corporate
expenses....... 3,642 3,642 3,642 3,642
Management
fees........... -- 1,243 1,243 1,243 1,243
Depreciation and
amortization... 45,856 11,939 7,887C 65,682 3,098C 62,584 1,535C 64,147 4,633C
-------- -------- ------- --------- ------ --------- ------ --------- -------
189,754 36,471 7,887 234,112 3,098 231,014 1,535 232,577 4,633
-------- -------- ------- --------- ------ --------- ------ --------- -------
Operating loss.. (41,962) (7,543) (7,887) (57,392) 2,897 (54,495) 1,285 (56,107) 4,182
OTHER INCOME (EXPENSE)
Interest and
other income... 5,143 3,669 8,812 8,812 8,812
Interest
expense........ (58,058) (13,941) (71,999) (71,999) (71,999)
Other........... 1,205 2,877 4,082 4,082 4,082
Equity in net
losses of
affiliates..... -- (10,558) (10,558) 4,910E (5,648) 5,648E (4,910) 10,558E
-------- -------- ------- --------- ------ --------- ------ --------- -------
Net loss........ (93,672) (25,496) (7,887) (127,055) 7,807 (119,248) 6,933 (120,122) 14,740
Preferred stock
dividends...... (3,638) (3,638) (3,638) (3,638)
-------- -------- ------- --------- ------ --------- ------ --------- -------
Net loss
available to
common
shareholders... $(97,310) $(25,496) $(7,887) $(130,693) $7,807 $(122,886) $6,933 $(123,760) $14,740
======== ======== ======= ========= ====== ========= ====== ========= =======
Net loss per
common share--
basic and fully
diluted........ $ (3.02) $ (2.56) $ (2.72) $ (2.59)
======== ========= ========= =========
Weighted average
shares
outstanding.... 32,250 18,764B 51,014 (5,817)B 45,197 (3,191)B 47,823 (9,009)B
======== ========= ========= =========
<CAPTION>
PRO FORMA
WITHOUT
BOTH
----------
<S> <C>
REVENUES........ $ 176,269
COSTS AND
EXPENSES
Operating
expenses....... 86,650
Selling, general
and
administrative
expenses....... 70,700
Franchise fees.. 6,195
Corporate
expenses....... 3,642
Management
fees........... 1,243
Depreciation and
amortization... 61,049
----------
229,479
----------
Operating loss.. (53,210)
OTHER INCOME (EXPENSE)
Interest and
other income... 8,812
Interest
expense........ (71,999)
Other........... 4,082
Equity in net
losses of
affiliates..... --
----------
Net loss........ (112,315)
Preferred stock
dividends...... (3,638)
----------
Net loss
available to
common
shareholders... $(115,953)
==========
Net loss per
common share--
basic and fully
diluted........ $ (2.76)
==========
Weighted average
shares
outstanding.... 42,005
==========
</TABLE>
42
<PAGE>
NTL INCORPORATED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
NTL PARTNERS PRO FORMA TO REMOVE WITHOUT TO REMOVE WITHOUT
(HISTORICAL) (HISTORICAL) ADJUSTMENTS (ASSUMING ALL) LONDON LONDON BIRMINGHAM BIRMINGHAM
------------ ------------ ----------- -------------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES........ $ 491,775 $ 92,812 $ -- $ 584,587 $ (672)D $ 583,915 $(1,063)D $ 583,524
COSTS AND
EXPENSES
Operating ex-
penses......... 301,644 32,144 333,788 333,788 333,788
Selling, general
and
administrative
expenses....... 169,133 50,532 219,665 219,665 219,665
Franchise fees.. 23,587 23,587 23,587 23,587
Corporate ex-
penses......... 18,324 18,324 18,324 18,324
Nonrecurring
charges........ 20,642 20,642 20,642 20,642
Management
fees........... -- 5,248 5,248 5,248 5,248
Depreciation and
amortization... 150,509 41,913 32,387C 224,809 12,393C 212,416 6,142C 218,667
--------- --------- -------- --------- ------- --------- -------- ---------
683,839 129,837 32,387 846,063 12,393 833,670 6,142 839,921
--------- --------- -------- --------- ------- --------- -------- ---------
Operating loss.. (192,064) (37,025) (32,387) (261,476) 11,721 (249,755) 5,079 (256,397)
OTHER INCOME
(EXPENSE)
Interest and
other income... 28,415 11,890 40,305 40,305 40,305
Interest ex-
pense.......... (202,570) (41,348) (243,918) (243,918) (243,918)
Other........... 22,071 (8,860) 13,211 13,211 13,211
Equity in net
losses of
affiliates..... -- (34,986) (34,986) 20,873E (14,113) 14,113E (20,873)
--------- --------- -------- --------- ------- --------- -------- ---------
Loss before
income taxes... (344,148) (110,329) (32,387) (486,864) 32,594 (454,270) 19,192 (467,672)
Income tax bene-
fit............ 15,591 15,591 15,591 15,591
--------- --------- -------- --------- ------- --------- -------- ---------
Net loss........ (328,557) (110,329) (32,387) (471,273) 32,594 (438,679) 19,192 (452,081)
Preferred stock
dividends...... (11,978) (11,978) (11,978) (11,978)
--------- --------- -------- --------- ------- --------- -------- ---------
Net loss
available to
common
shareholders... $(340,535) $(110,329) $(32,387) $(483,251) $32,594 $(450,657) $ 19,192 $(464,059)
========= ========= ======== ========= ======= ========= ======== =========
Net loss per
common share--
basic and fully
diluted........ $ (10.60) $ (9.50) $ (10.00) $ (9.73)
========= ========= ========= =========
Weighted average
shares
outstanding.... 32,117 18,764 B 50,881 (5,817)B 45,064 (3,191)B 47,690
========= ========= ========= =========
<CAPTION>
ADJUSTMENTS PRO FORMA
TO REMOVE WITHOUT
BOTH BOTH
----------- ----------
<S> <C> <C>
REVENUES........ $(1,735)D $ 582,852
COSTS AND
EXPENSES
Operating ex-
penses......... 333,788
Selling, general
and
administrative
expenses....... 219,665
Franchise fees.. 23,587
Corporate ex-
penses......... 18,324
Nonrecurring
charges........ 20,642
Management
fees........... 5,248
Depreciation and
amortization... 18,534C 206,275
----------- ----------
18,534 827,529
----------- ----------
Operating loss.. 16,799 (244,677)
OTHER INCOME
(EXPENSE)
Interest and
other income... 40,305
Interest ex-
pense.......... (243,918)
Other........... 13,211
Equity in net
losses of
affiliates..... 34,986E --
----------- ----------
Loss before
income taxes... 51,785 (435,079)
Income tax bene-
fit............ 15,591
----------- ----------
Net loss........ 51,785 (419,488)
Preferred stock
dividends...... (11,978)
----------- ----------
Net loss
available to
common
shareholders... $51,785 $(431,466)
=========== ==========
Net loss per
common share--
basic and fully
diluted........ $ (10.30)
==========
Weighted average
shares
outstanding.... (9,009)B 41,872
==========
</TABLE>
43
<PAGE>
NTL INCORPORATED
PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
NTL PARTNERS PRO FORMA TO REMOVE WITHOUT TO REMOVE WITHOUT
(HISTORICAL) (HISTORICAL) ADJUSTMENTS (ASSUMING ALL) LONDON LONDON BIRMINGHAM BIRMINGHAM
------------ ------------ ----------- -------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents....... $1,169,699 $164,163 $ -- $1,333,862 $ -- $1,333,862 $ -- $1,333,862
Other current
assets............ 213,893 14,244 228,137 228,137 228,137
---------- -------- --------- ---------- -------- ---------- -------- ----------
Total current
assets.............. 1,383,592 178,407 -- 1,561,999 -- 1,561,999 -- 1,561,999
Investment in
affiliates.......... 96,464 96,464 57,891B 38,573 38,573B 57,891
Fixed assets, net... 1,853,181 492,175 64,589B 2,409,945 2,409,945 2,409,945
Intangible assets,
net................. 359,251 78,463 407,590B 845,304 185,883B 659,421 92,117B 753,187
Other assets, net... 98,927 12,162 111,089 111,089 111,089
---------- -------- --------- ---------- -------- ---------- -------- ----------
Total assets.... $3,694,951 $857,671 $ 472,179 $5,024,801 $243,774 $4,781,027 $130,690 $4,894,111
========== ======== ========= ========== ======== ========== ======== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Other current
liabilities....... $ 292,936 $ 44,729 $ -- $ 337,665 $ -- $ 337,665 $ -- $ 337,665
Current portion of
long-term debt and
capital leases.... 3,268 3,268 3,268 3,268
Due to
affiliates........ 1,794 1,794 1,794 1,794
---------- -------- --------- ---------- -------- ---------- -------- ----------
Total current
liabilities..... 292,936 49,791 -- 342,727 -- 342,727 -- 342,727
Long-term debt...... 3,357,217 522,978 3,880,195 3,880,195 3,880,195
Other............... 430 4,555 4,985 4,985 4,985
Deferred income
taxes............... 70,907 132,815B 203,722 57,624B 146,098 28,556B 175,166
Long-term debt, due
to shareholder...... 19,253 19,253 19,253 19,253
Senior redeemable
exchangeable
preferred stock..... 112,250 112,250 112,250 112,250
Shareholders'
equity:
Common stock and
additional paid-in
capital........... 536,602 600,458B 1,137,060 186,150B 950,910 102,134B 1,034,926
Partners' equity.. 261,094 (261,094)B -- -- --
Accumulated other
comprehensive
income............ 135,333 135,333 135,333 135,333
Deficit........... (810,724) (810,724) (810,724) (810,724)
---------- -------- --------- ---------- -------- ---------- -------- ----------
(138,789) 261,094 339,364 461,669 186,150 275,519 102,134 359,535
---------- -------- --------- ---------- -------- ---------- -------- ----------
Total
liabilities and
shareholders'
equity.......... $3,694,951 $857,671 $ 472,179 $5,024,801 $243,774 $4,781,027 $130,690 $4,894,111
========== ======== ========= ========== ======== ========== ======== ==========
<CAPTION>
ADJUSTMENTS PRO FORMA
TO REMOVE WITHOUT
BOTH BOTH
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents....... $ -- $1,333,862
Other current
assets............ 228,137
----------- -----------
Total current
assets.............. -- 1,561,999
Investment in
affiliates.......... 96,464B --
Fixed assets, net... 2,409,945
Intangible assets,
net................. 278,000B 567,304
Other assets, net... 111,089
----------- -----------
Total assets.... $374,464 $4,650,337
=========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Other current
liabilities....... $ -- $ 337,665
Current portion of
long-term debt and
capital leases.... 3,268
Due to
affiliates........ 1,794
----------- -----------
Total current
liabilities..... -- 342,727
Long-term debt...... 3,880,195
Other............... 4,985
Deferred income
taxes............... 86,180B 117,542
Long-term debt, due
to shareholder...... 19,253
Senior redeemable
exchangeable
preferred stock..... 112,250
Shareholders'
equity:
Common stock and
additional paid-in
capital........... 288,284B 848,776
Partners' equity.. --
Accumulated other
comprehensive
income............ 135,333
Deficit........... (810,724)
----------- -----------
288,284 173,385
----------- -----------
Total
liabilities and
shareholders'
equity.......... $374,464 $4,650,337
=========== ===========
</TABLE>
44
<PAGE>
NTL INCORPORATED
PRO FORMA ADJUSTMENTS
(IN THOUSANDS)
<TABLE>
<S> <C> <C> <C> <C>
A CONSENT PAYMENTS............... $ --
=========
<CAPTION>
ASSUMING WITHOUT WITHOUT WITHOUT
ALL LONDON BIRMINGHAM BOTH
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
B PURCHASE PRICE AND ALLOCATION
PURCHASE PRICE
Partners series A shares out-
standing........................ 37,232 37,232 37,232 37,232
Partners series B shares out-
standing........................ 12,873 12,873 12,873 12,873
--------- --------- --------- ---------
Total shares outstanding..... 50,105 50,105 50,105 50,105
Exchange ratio................... 0.3745 0.2584 0.3108 0.1947
--------- --------- --------- ---------
NTL Shares to be issued........ 18,764 12,947 15,573 9,755
NTL closing price on February 4,
1998............................ $ 32.00 $ 32.00 $ 32.00 $ 32.00
--------- --------- --------- ---------
Purchase price................... 600,458 414,308 498,324 312,174
Net assets of Partners at March
31, 1998........................ (261,094) (261,094) (261,094) (261,094)
Partners intangibles at March 31,
1998............................ 78,463 78,463 78,463 78,463
Investment in Birmingham......... 38,573 38,573
Investment in London............. 57,891 57,891
--------- --------- --------- ---------
Excess of Purchase Price over net
tangible assets acquired........ $ 417,827 $ 289,568 $ 354,266 $ 226,007
========= ========= ========= =========
ALLOCATED TO
Fixed assets..................... $ 64,589 $ 64,589 $ 64,589 $ 64,589
Intangible assets................ 486,053 300,170 393,936 208,053
Deferred taxes................... (132,815) (75,191) (104,259) (46,635)
--------- --------- --------- ---------
$ 417,827 $ 289,568 $ 354,266 $ 226,007
========= ========= ========= =========
C AMORTIZATION AND DEPRECIATION
For the three months ended March
31, 1998:
Depreciation of fixed asset al-
location (over 7 years)....... $ 2,307 $ 2,307 $ 2,307 $ 2,307
Amortization of additional
intangibles (over 15 years)... 8,101 5,003 6,566 3,468
Partners historical amortiza-
tion of intangibles........... (2,521) (2,521) (2,521) (2,521)
--------- --------- --------- ---------
$ 7,887 $ 4,789 $ 6,352 $ 3,254
========= ========= ========= =========
For the year ended December 31,
1997:
Depreciation of fixed asset
allocation (over 7 years)..... $ 9,227 $ 9,227 $ 9,227 $ 9,227
Amortization of additional
intangibles (over 15 years)... 32,404 20,011 26,262 13,870
Partners historical
amortization of intangibles... (9,244) (9,244) (9,244) (9,244)
--------- --------- --------- ---------
$ 32,387 $ 19,994 $ 26,245 $ 13,853
========= ========= ========= =========
D CONSULTING REVENUE
For the three months ended March
31, 1998........................ $ -- $ 201 $ 250 $ 451
========= ========= ========= =========
For the year ended December 31,
1997............................ $ -- $ 672 $ 1,063 $ 1,735
========= ========= ========= =========
E EQUITY IN NET LOSS
For the three months ended March
31, 1998........................ $ -- $ 4,910 $ 5,648 $ 10,558
========= ========= ========= =========
For the year ended December 31,
1997............................ $ -- $ 20,873 $ 14,113 $ 34,986
========= ========= ========= =========
</TABLE>
45
<PAGE>
DESCRIPTION OF NOTES
GENERAL
Each class of New Notes offered hereby will be issued pursuant to its
respective Indenture, each dated as of March 13, 1998, each between the
Company and The Chase Manhattan Bank, as trustee (the "Trustee"). The
Indenture will be subject to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The following summary of certain provisions of the
Indentures, which have been filed as exhibits to the Registration Statement of
which this Prospectus forms a part, does not purport to be complete and is
qualified in its entirety by reference to the Indentures. The Indentures do
not purport to be complete and are subject to, and qualified in their entirety
by reference to the Trust Indenture Act, and to all provisions of the
Indentures, including the definition of certain terms therein and those terms
made part of the Indentures by reference to the Trust Indenture Act, as in
effect on the date of the Indentures. The definitions of certain terms used in
the following summary are set forth below under "--Certain Definitions." In
this "Description of Notes," the term "Company" refers to NTL Incorporated and
not any of its Subsidiaries.
The Old Notes are, and the New Notes will be unsecured obligations of the
Company, ranking pari passu in right of payment with each other and with all
senior unsecured Indebtedness of the Company and senior in right of payment to
all subordinated Indebtedness of the Company.
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Company is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Notes. As a result,
the Old Notes are, and the New Notes will be effectively subordinated to all
existing and future indebtedness and other liabilities and commitments of such
Subsidiaries with respect to the cash flow and assets of those Subsidiaries.
The Trustee will authenticate and deliver from time to time New Notes for
original issue only in exchange for (i) a like principal amount of Old
Sterling Senior Notes, or (ii) a like principal amount at maturity of Old
Sterling Deferred Coupon Notes or Old USD Deferred Coupon Notes, as
applicable.
Any Old Notes of a class that remain outstanding after the completion of the
Exchange Offer, together with the New Notes of such class issued in connection
with the Exchange Offer, will be treated as a single class of securities under
the applicable Indenture.
Application has been made to list the New Notes on the Luxembourg Stock
Exchange.
PRINCIPAL, MATURITY AND INTEREST
The New Sterling Senior Notes will be limited in aggregate principal amount
to (Pounds)125,000,000. The New Sterling Senior Notes will accrue interest at
the rate of 9.5% per annum and will be payable semiannually on April 1 and
October 1 of each year, beginning on October 1, 1998, to the holders of record
on the immediately preceding March 15 and September 15, respectively. Interest
on the New Sterling Senior Notes will accrue from the most recent date to
which interest has been paid on the Old Sterling Senior Notes or, if no
interest has been paid on the Old Notes, from March 13, 1998. The New Sterling
Deferred Coupon Notes and the New USD Deferred Coupon Notes will be limited in
aggregate principal amount at maturity to (Pounds)300,000,000 and
$1,300,000,000, respectively. The Old Sterling Deferred Coupon Notes and the
Old USD Deferred Coupon Notes were each issued at a substantial discount from
their principal amounts at maturity. Until April 1, 2003, no interest will
accrue on the New Sterling Deferred Coupon Notes and the New USD Deferred
Coupon Notes, but the Accreted Value of each of the New Sterling Deferred
Coupon Notes and the New USD Deferred Coupon Notes will increase (representing
amortization of original issue discount) between March 13, 1998 and April 1,
2003, on a semiannual bond equivalent basis using a 360-day year comprised of
twelve 30-day months, such that the Accreted Value of the New Sterling
Deferred Coupon Notes or the New USD Deferred Coupon Notes, as the case may
be, shall be equal to the full principal amount at maturity of the New
Sterling Deferred Coupon Notes or the New USD Deferred Coupon Notes, as the
case may be, on April 1, 2003. Commencing April 1, 2003, interest on each of
the New Sterling Deferred Coupon Notes and the New USD Deferred Coupon Notes
46
<PAGE>
will accrue at rates of 10.75% per annum and 9.75% per annum, respectively,
and will be payable in cash, semiannually in arrears, on each April 1 and
October 1, commencing October 1, 2003, to holders of record on the immediately
preceding March 15 and September 15. Interest on overdue principal and (to the
extent permitted by law) on overdue installments of interest will accrue at a
rate equal to the rate borne by the applicable New Notes. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months. A
reference to a payment of principal in respect of the New Notes includes a
payment of premium, if any.
The New Notes will be payable both as to principal and interest (on
presentation of such New Notes if in certificated form) at the offices or
agencies of the Company maintained for such purpose within the City and State
of New York and London, England and, so long as the New Notes are listed on
the Luxembourg Stock Exchange, at the office of the paying agent maintained in
Luxembourg or, at the option of the Company, payment of interest may be made
by check mailed to the holders of the New Notes at their respective addresses
set forth in the register of holders of New Notes or, if a holder so requests,
by wire transfer of immediately available funds to an account previously
specified in writing by such holder to the Company and the Trustee. Until
otherwise designated by the Company, the Company's office or agency in New
York and London, respectively, will be the offices of the Trustee maintained
for such purpose. The Company has designated Banque Internationale a
Luxembourg to act as paying agent in Luxembourg. Each of the New Notes will be
payable on maturity on April 1, 2008 at 100% of its principal amount and will
be issued in registered form, without coupons, and in denominations of
(Pounds)1,000 or $1,000, as applicable, and integral multiples thereof.
OPTIONAL REDEMPTION
Except as referred to herein under "--Covenants--Additional Amounts;
Optional Tax Redemption," the Notes are not redeemable at the Company's option
prior to April 1, 2003. Thereafter, the Notes will be subject to redemption at
the option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest thereon to
the applicable redemption date, if redeemed during the twelve-month period
beginning on April 1 of the years indicated below:
<TABLE>
<CAPTION>
STERLING SENIOR STERLING DEFERRED USD DEFERRED
YEAR NOTES COUPON NOTES COUPON NOTES
---- --------------- ----------------- ------------
<S> <C> <C> <C>
2003....................... 104.750% 105.375% 104.875%
2004....................... 103.167% 103.583% 103.250%
2005....................... 101.583% 101.792% 101.625%
2006 and thereafter........ 100.000% 100.000% 100.000%
</TABLE>
In the case of a redemption of any class of Notes referred to herein under
"--Covenants--Additional Amounts; Optional Tax Redemption," redemption of such
Notes shall be made at the redemption prices specified in the applicable
Indentures plus accrued and unpaid interest, if any, to the applicable
redemption date.
SUBSTITUTION OF CURRENCY
Although there can be no assurance that a single European currency will be
adopted or, if adopted, on what time schedule, the Treaty on the European
Economic and Monetary Union provides for the introduction of the Euro in
substitution for the national currencies of the member states which adopt the
Euro. If the United Kingdom adopts the Euro, the regulations of the European
Commission relating to the Euro shall apply to each of the Sterling Senior
Notes, the Sterling Deferred Coupon Notes, the Sterling Senior Notes Indenture
and the Sterling Deferred Coupon Notes Indenture. The circumstances and
consequences described in this paragraph entitle neither the Company nor any
holder of the Sterling Senior Notes or Sterling Deferred Coupon Notes to early
redemption, rescission, notice or repudiation of the terms and conditions of
the Sterling Senior Notes or Sterling Deferred Coupon Notes or the applicable
Indentures or to raise other defenses or to request any compensation claim,
nor will they affect any of the other obligations of the Company under the
Sterling Senior Notes or Sterling Deferred Coupon Notes and the applicable
Indentures.
47
<PAGE>
MANDATORY REDEMPTION AND REPURCHASE
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes. The Company is required to make a Change
of Control Offer (as defined below) and an Asset Sale Offer (as defined below)
with respect to a repurchase of the Notes under the circumstances described
under the captions "Change of Control" and "Asset Sales," respectively.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control Triggering Event, each holder of
Notes shall have the right to require the Company to repurchase all or any
part (equal to (Pounds)1,000 or $1,000, as applicable, or an integral multiple
thereof) of such holder's Notes pursuant to the offer described below (the
"Change of Control Offer") at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase (or, in the case of repurchases of Sterling Deferred Coupon Notes or
USD Deferred Coupon Notes prior to April 1, 2003, at a purchase price equal to
101% of the Accreted Value thereof as of the date of purchase) (the "Change of
Control Payment"). Within 40 days following any Change of Control Triggering
Event, the Company shall mail a notice to each holder, and, as long as the
Notes are listed on the Luxembourg Stock Exchange, publish a notice in one
leading newspaper with circulation in Luxembourg, stating: (1) that the Change
of Control Offer is being made pursuant to the covenant entitled "Change of
Control" and that all Notes tendered will be accepted for payment; (2) the
purchase price and the purchase date, which shall be no earlier than 30 days
nor later than 40 days from the date such notice is mailed (the "Change of
Control Payment Date"); (3) that any Notes not tendered will continue to
accrue interest (and, if applicable, the Accreted Value of any Sterling
Deferred Coupon Notes and USD Deferred Coupon Notes not tendered will continue
to increase as provided in such Notes); (4) that, unless the Company defaults
in the payment of the Change of Control Payment, all Notes accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date (and, if applicable, the Accreted
Value of any Sterling Deferred Coupon Notes and USD Deferred Coupon Notes
tendered will cease to increase as provided in such Notes); (5) that holders
electing to have any Notes purchased pursuant to a Change of Control Offer
will be required to surrender the Notes, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying
Agent at the address specified in the notice prior to the close of business on
the third Business Day preceding the Change of Control Payment Date; (6) that
holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder, the principal
amount of Notes delivered for purchase, and a statement that such holder is
withdrawing his election to have such Notes purchased; and (7) that holders
whose Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to (Pounds)1,000 or $1,000 in principal
amount, as applicable, or an integral multiple thereof.
The Company will comply with the requirements of Rules 13e-4 and 14e-1 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes in
connection with a Change of Control Triggering Event.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (2) deposit with the Paying Agent an amount equal
to the Change of Control Payment in respect of all Notes or portions thereof
so tendered and (3) deliver or cause to be delivered to the Trustee the Notes
so accepted together with an Officers' Certificate stating the Notes or
portions thereof tendered to the Company. The Paying Agent shall promptly mail
to each holder of Notes so accepted (or, if such a holder requests, wire
transfer immediately available funds to an account previously specified in
writing by such holder to the Company and the Paying Agent) payment in an
amount equal to the purchase price for such Notes, and the Trustee shall
promptly authenticate and mail to each holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new Note shall be in a principal amount of (Pounds)1,000 or
$1,000, as applicable, or an integral multiple
48
<PAGE>
thereof. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
Except as described above with respect to a Change of Control Triggering
Event, the Indentures do not contain any other provisions that permit the
holders of the Notes to require that the Company repurchase or redeem the
Notes in the event of a takeover, recapitalization or similar restructuring.
The Indentures contain covenants which may afford holders of the Notes
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction, including the Change of Control
provision described above and the provisions described under "--Incurrence of
Indebtedness and Issuance of Preferred Stock" and "--Merger, Consolidation or
Sale of Assets" below. Each such covenant is, however, subject to certain
exceptions which may permit the Company to be involved in such a highly
leveraged transaction that may adversely affect the holders of the Notes.
The Change of Control Offer requirement of the Notes may in certain
circumstances make more difficult or discourage a takeover of the Company,
and, thus, the removal of incumbent management. The Change of Control Offer
requirement, however, is not the result of management's knowledge of any
specific effort to accumulate the Company's stock or to obtain control of the
Company by means of a merger, tender offer, solicitation or otherwise, or part
of a plan by management to adopt a series of anti-takeover provisions.
Instead, the Change of Control Offer requirement is a result of negotiations
between the Company and the Initial Purchasers. Management has not entered
into any agreement or plan involving a Change of Control, although it is
possible that the Company would decide to do so in the future. Subject to the
limitations discussed below, the Company could, in the future, enter into
certain transactions including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control Triggering
Event under the Indentures, but that could increase the amount of indebtedness
outstanding at such time or otherwise affect the Company's capital structure
or credit ratings.
The indentures for the 10% Notes, in an aggregate principal amount at
maturity of $400,000,000, the 10 7/8% Notes, in an aggregate principal amount
at maturity of $212,000,000, the 12 3/4% Notes, in an aggregate principal
amount at maturity of $277,803,500, and the 11 1/2% Notes, in an aggregate
principal amount at maturity of $1,050,000,000, which rank pari passu with the
Notes, also contain change of control provisions. The indentures for the
Convertible Notes, which are subordinated to the Notes, also contain change of
control provisions.
The Company's ability to pay cash to the holders of Notes pursuant to a
Change of Control Offer may be limited by the Company's then existing
financial resources. See "Risk Factors--Potential Adverse Consequences of
Leverage" and "--Holding Company Structure; Dependence Upon Cash Flow from
Subsidiaries." The Credit Facility does, and any future credit agreements or
other agreements relating to indebtedness of the Company may, contain
prohibitions or restrictions on the Company's ability to effect a Change of
Control Payment. In the event a Change of Control Triggering Event occurs at a
time when such prohibitions or restrictions are in effect, the Company could
seek the consent of its lenders to the purchase of Notes and other
Indebtedness containing change of control provisions or could attempt to
refinance the borrowings that contain such prohibition. If the Company does
not obtain such a consent or repay such borrowings, the Company will be
effectively prohibited from purchasing Notes. In such case, the Company's
failure to purchase tendered Notes would constitute an Event of Default under
the Indentures. Moreover, the events that constitute a Change of Control or
require an Asset Sale Offer under the Indentures constitute events of default
under the Credit Facility and may also constitute events of default under
future debt instruments or credit agreements of the Company or the Company's
Subsidiaries. Such events of default may permit the lenders under such debt
instruments or credit agreements to accelerate the debt and, if such debt is
not paid or repurchased, to enforce their security interests in what may be
all or substantially all of the assets of the Company's Subsidiaries. Any such
enforcement may limit the Company's ability to raise cash to repay or
repurchase the Notes.
The Company will not be required to make a Change of Control Offer in the
event the Company enters into a transaction with management or their
affiliates who are Permitted Holders. The definition of Change of Control
includes a phrase relating to the sale, lease, transfer, conveyance or other
disposition of "all or substantially all"
49
<PAGE>
of the Company's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Notes to require the Company to repurchase such Notes as a result of
a sale, lease, transfer, conveyance or other disposition of less than all of
the assets of the Company and its Subsidiaries to another Person may be
uncertain.
ASSET SALES
The Indentures will provide that the Company will not and will not permit
any of its Restricted Subsidiaries to cause, make or suffer to exist any Asset
Sale, unless (i) no Default exists or is continuing immediately prior to and
after giving effect to such Asset Sale, (ii) the Company (or the Restricted
Subsidiary, as the case may be) receives consideration at the time of such
Asset Sale at least equal to the fair market value (evidenced for purposes of
this covenant by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets sold or
otherwise disposed of and (iii) at least 80% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of (w)
Cash Equivalents, (x) Replacement Assets, (y) publicly traded Equity Interests
of a Person who is, directly or indirectly, engaged primarily in one or more
Cable Businesses; provided, however, that the Company or such Restricted
Subsidiary shall Monetize such Equity Interests by sale to one or more Persons
(other than to the Company or a Subsidiary thereof) at a price not less than
the fair market value thereof within 180 days of the consummation of such
Asset Sale, or (z) any combination of the foregoing clauses (w) through (y);
provided, however, that the amount of (x) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto), of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes) that are
assumed by the transferee of any such assets and (y) any notes or other
obligations received by the Company or any such Restricted Subsidiary from
such transferee that are within five Business Days converted by the Company or
such Restricted Subsidiary into cash, shall be deemed to be Cash Equivalents
(to the extent of the Cash Equivalents received in such conversion) for
purposes of this clause (iii).
Within 360 days after any Asset Sale, the Company (or the Restricted
Subsidiary, as the case may be) will cause the Net Proceeds from such Asset
Sale (i) to be used to permanently reduce Indebtedness of a Restricted
Subsidiary or (ii) to be invested or reinvested in Replacement Assets. Pending
final application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any
manner that is not prohibited by the applicable Indenture. Any Net Proceeds
from any Asset Sale that are not used or reinvested as provided in the
preceding sentence constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $15 million, the Company will make an offer (an "Asset
Sale Offer") to all holders of Notes and Other Qualified Notes to purchase the
maximum principal amount of Notes and Other Qualified Notes (determined on a
pro rata basis according to the accreted value or principal amount, as the
case may be, of the Notes and the Other Qualified Notes; provided, however,
that the Asset Sale Offer must be made first to the holders of the Applicable
Notes) that may be purchased out of the Excess Proceeds, if any, remaining
after the consummation of the aforementioned Asset Sale Offer to the holders
of the Applicable Notes (x) with respect to the Other Qualified Notes, based
on the terms set forth in the indenture related to each issue of the Other
Qualified Notes and (y) with respect to the Notes, at an offer price in cash
in an amount equal to 100% of the outstanding principal amount thereof plus
accrued and unpaid interest, if any, to the date fixed for the closing of such
offer (or, in the case of repurchases of Sterling Deferred Coupon Notes or USD
Deferred Coupon Notes prior to April 1, 2003, at a purchase price equal to
100% of the Accreted Value thereof as of the date of repurchase), in
accordance with the procedures set forth in the Indentures. To the extent that
the aggregate principal amount or accreted value, as the case may be, of Notes
and Other Qualified Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, if any, remaining after the consummation of the
aforementioned Asset Sale Offer to the holders of the Applicable Notes, the
Company may use such deficiency for general corporate purposes. If the
aggregate principal amount or accreted value, as the case may be, of Notes and
Other Qualified Notes surrendered by holders thereof exceeds the amount of
Excess Proceeds, if any, remaining after the consummation of the
aforementioned Asset Sale Offer to the holders of the Applicable Notes, then
such remaining Excess Proceeds will be allocated pro rata according to
accreted value or principal amount,
50
<PAGE>
as the case may be, to the Notes and each issue of the Other Qualified Notes,
and the Trustee will select the Notes to be purchased from the amount
allocated to the Notes on the basis set forth under "Selection and Notice"
below. Upon completion of such offers to purchase each of the Applicable Notes
and the Notes and the Other Qualified Notes, the amount of Excess Proceeds
will be reset at zero. No such Asset Sale Offer to purchase the Notes and
Other Qualified Notes shall be required to be made by the Company pursuant to
the foregoing provisions if there are no Excess Proceeds remaining after the
consummation of the Asset Sale Offer made to holders of the Applicable Notes.
Notwithstanding the foregoing, the Company and its Subsidiaries may (i)
sell, lease, transfer, convey or otherwise dispose of assets or property
acquired after October 14, 1993, by the Company or any Subsidiary in a sale-
and-leaseback transaction so long as the proceeds of such sale are applied
within five Business Days to permanently reduce Indebtedness of a Restricted
Subsidiary or if there is no such Indebtedness or such proceeds exceed the
amount of such Indebtedness then such proceeds or excess proceeds are
reinvested in Replacement Assets within 360 days after such sale, lease,
transfer, conveyance or disposition, (ii)(x) swap or exchange assets or
property with a Cable Controlled Subsidiary or (y) issue, sell, lease,
transfer, convey or otherwise dispose of equity securities of any of the
Company's Subsidiaries to a Cable Controlled Subsidiary, in each of cases (x)
and (y) so long as (A) the ratio of Indebtedness to Annualized Pro Forma
EBITDA of the Company after such transaction is equal to or less than the
ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company
immediately preceding such transaction; provided, however, that if the ratio
of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately
preceding such transaction is 6:1 or less, then the ratio of Indebtedness to
Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such ratio
immediately preceding such transaction and (B) either (I) the assets so
contributed consist solely of a license to operate a Cable Business and the
Net Households covered by all of the licenses to operate cable and telephone
systems held by the Company and its Restricted Subsidiaries immediately after
and giving effect to such transaction equals or exceeds the number of Net
Households covered by all of the licenses to operate cable and telephone
systems held by the Company and its Restricted Subsidiaries immediately prior
to such transaction or (II) the assets so contributed consist solely of Cable
Assets and the value of the Capital Stock received, immediately after and
giving effect to such transaction, as determined by an investment banking firm
of recognized standing with knowledge of the Cable Business, equals or exceeds
the value of the Cable Assets exchanged for such Capital Stock, (iii) sell,
transfer or otherwise dispose of Long Distance/Microwave Assets, or (iv)
issue, sell, lease, transfer, convey or otherwise dispose of Equity Interests
of the Company (or any Capital Stock Sales Proceeds therefrom) to any Person
(including Non-Restricted Subsidiaries).
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of any securities exchange on which the Notes are listed, or, in
the absence of such requirements or if the Notes are not so listed, on a pro
rata basis, provided that no Notes of (Pounds)1,000 or $1,000, as applicable,
or less shall be redeemed in part. Notice of redemption shall be mailed by
first class mail at least 30 but not more than 60 days before the redemption
date to each holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original Note. On and after the redemption date, interest ceases to accrue
(and, if applicable, the Accreted Value of any Sterling Deferred Coupon Notes
and USD Deferred Coupon Notes tendered will cease to increase as provided in
such Notes), on Notes or portions of them called for redemption.
CERTAIN COVENANTS
Restricted Payments
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any distribution on account of the Company's or any
of its Restricted Subsidiaries' Equity Interests (other than (x) dividends or
distributions payable in Equity
51
<PAGE>
Interests (other than Disqualified Stock) of the Company or such Restricted
Subsidiary or (y) dividends or distributions payable to the Company or any
Wholly Owned Subsidiary of the Company, or (z) pro rata dividends or pro rata
distributions payable by a Restricted Subsidiary); (ii) purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Company
(other than any such Equity Interests owned by the Company or any Wholly Owned
Subsidiary of the Company); (iii) voluntarily purchase, redeem or otherwise
acquire or retire for value any Indebtedness that is subordinated to the
Notes; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the Issuance Date (including Restricted Payments permitted by clauses
(ii) through (ix) of the next succeeding paragraph), is less than the sum
of (x) the difference between Cumulative EBITDA and 1.5 times Cumulative
Interest Expense plus (y) Capital Stock Sale Proceeds plus (z) cash
received by the Company or a Restricted Subsidiary from a Non-Restricted
Subsidiary (other than cash which is or is required to be repaid or
returned to such Non-Restricted Subsidiary); provided, however, that to the
extent that any Restricted Investment that was made after the date of the
Indentures is sold for cash or otherwise liquidated or repaid for cash, the
amount credited pursuant to this clause (z) shall be the lesser of (A) the
cash received with respect to such sale, liquidation or repayment of such
Restricted Investment (less the cost of such sale, liquidation or
repayment, if any) and (B) the initial amount of such Restricted
Investment, in each case as determined in good faith by the Company's Board
of Directors.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
applicable Indenture; (ii) (x) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company or any Restricted
Subsidiary or (y) an Investment in any Person, in each case, in exchange for,
or out of the proceeds of, the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of other Equity Interests (other than
any Disqualified Stock) of the Company provided that the Company delivers to
the Trustee: (1) with respect to any transaction involving in excess of $1
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such transaction is approved by a majority of the
directors on the Board of Directors; and (2) with respect to any transaction
involving in excess of $25 million, an opinion as to the fairness to the
Company or such Subsidiary from a financial point of view issued by an
investment banking firm of national standing with high yield experience,
together with an Officers' Certificate to the effect that such opinion
complies with this clause (2), provided, that the amount of such proceeds from
the sale of such Equity Interests shall be excluded in each case from Capital
Stock Sale Proceeds for purposes of clause (b)(y), above; (iii) Investments by
the Company or any Restricted Subsidiary in a Non-Controlled Subsidiary which
(A) has no Indebtedness on a consolidated basis other than Indebtedness
incurred to finance the purchase of equipment used in a Cable Business, (B)
has no restrictions (other than restrictions imposed or permitted by the
Indentures or the indentures governing the Other Qualified Notes or the
Applicable Notes or any other instrument governing unsecured indebtedness of
the Company which is pari passu with the Notes) on its ability to pay
dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries, (C) is or will be a Cable Business and (D) uses the
proceeds of such Investment for constructing a Cable Business or the working
capital needs of a Cable Business; (iv) the redemption, purchase, defeasance,
acquisition or retirement of Indebtedness that is subordinated to the Notes
(including premium, if any, and accrued and unpaid interest) made by exchange
for, or out of the proceeds of the substantially concurrent sale (other than
to a Restricted Subsidiary of the Company) of, (A) Equity Interests of the
Company provided, that the amount of such proceeds from the sale of such
Equity Interests shall be excluded in each case from Capital Stock Sale
Proceeds for purposes of clause (b)(y), above or (B) Refinancing Indebtedness
permitted to be incurred under the "Incurrence of Indebtedness and Issuance of
Preferred Stock" covenant; (v) Investments by the Company or any Restricted
Subsidiary in a Non-Controlled Subsidiary which is or will be a Cable Business
in an amount not
52
<PAGE>
to exceed $80 million in the aggregate plus the sum of (x) cash received by
the Company or a Restricted Subsidiary from a Non-Restricted Subsidiary (other
than cash which is or is required to be repaid or returned to such Non-
Restricted Subsidiary) and (y) Capital Stock Sale Proceeds (excluding the
aggregate net sale proceeds to be received upon conversion of the Convertible
Subordinated Notes), provided, that the amount of such proceeds from the sale
of such Equity Interests shall be excluded in each case from Capital Stock
Sale Proceeds for purposes of clause (b)(y), above; (vi) Investments by the
Company or any Restricted Subsidiary in Permitted Non-Controlled Assets; (vii)
the extension by the Company or any Restricted Subsidiary of trade credit to a
Non-Restricted Subsidiary extended on usual and customary terms in the
ordinary course of business, provided that the aggregate amount of such trade
credit shall not exceed $25 million at any one time; (viii) the payment of
cash dividends on the Preferred Stock accruing on or after February 15, 2004
or any mandatory redemption or repurchase of the Preferred Stock, in each
case, in accordance with the Certificate of Designations therefor; and (ix)
the exchange of all of the outstanding shares of Preferred Stock for
Subordinated Debentures in accordance with the Certificate of Designation for
the Preferred Stock.
Any Investment in a Subsidiary (other than the issuance, transfer or other
conveyance of Equity Interests of the Company (or any Capital Stock Sales
Proceeds therefrom)) that is designated by the Board of Directors as a Non-
Restricted Subsidiary shall become a Restricted Payment made on the date of
such designation in the amount of the greater of (x) the book value of such
Subsidiary on the date such Subsidiary becomes a Non-Restricted Subsidiary and
(y) the fair market value of such Subsidiary on such date as determined (A) in
good faith by the Board of Directors of such Subsidiary if such fair market
value is determined to be less than $25 million and (B) by an investment
banking firm of national standing with high yield underwriting expertise if
such fair market value is determined to be in excess of $25 million.
Not later than the fifth Business Day after making any Restricted Payment
(other than those referred to in sub-clause (vii) of the second paragraph
preceding this paragraph), the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed, which calculations may be based upon the
Company's latest available financial statements.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guaranty or otherwise become directly or indirectly liable with
respect to (collectively, "incur") any Indebtedness (including Acquired Debt)
and that the Company will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of preferred stock that
is Disqualified Stock; provided, however, that the Company may incur
Indebtedness or issue shares of Disqualified Stock and any of its Restricted
Subsidiaries may issue shares of preferred stock that is Disqualified Stock if
after giving effect to such issuance or incurrence on a pro forma basis, the
sum of (x) Indebtedness of the Company and its Restricted Subsidiaries, on a
consolidated basis, (y) the liquidation value of outstanding preferred stock
of Restricted Subsidiaries and (z) the aggregate amount payable by the Company
and its Restricted Subsidiaries, on a consolidated basis, upon redemption of
Disqualified Stock to the extent such amount is not included in the preceding
clause (y) shall be less than the product of Annualized Pro Forma EBITDA for
the latest fiscal quarter for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock or preferred stock is issued multiplied
by 7.0, determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom), as if the additional Indebtedness had been
incurred, or the Disqualified Stock or preferred stock had been issued, as the
case may be, at the beginning of such quarter.
The foregoing limitations will not apply to (a) the incurrence by the
Company or any Restricted Subsidiary of Indebtedness pursuant to the Credit
Facility, (b) the issuance by any Restricted Subsidiary of preferred stock
(other than Disqualified Stock) to the Company, any Restricted Subsidiary of
the Company or the holders of Equity Interests in any Restricted Subsidiary on
a pro rata basis to such holders, (c) the incurrence of
53
<PAGE>
Indebtedness or the issuance of preferred stock by the Company or any of its
Restricted Subsidiaries the proceeds of which are (or the credit support
provided by any such Indebtedness is), in each case, used to finance the
construction, capital expenditure and working capital needs of a Cable
Business (including, without limitation, payments made pursuant to any
License), the acquisition of Cable Assets or the Capital Stock of a Qualified
Subsidiary, (d) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount not
to exceed $50 million, (e) the incurrence by the Company or any Restricted
Subsidiary of any Permitted Acquired Debt, (f) the incurrence by the Company
or any Subsidiary of Indebtedness issued in exchange for, or the proceeds of
which are used to extend, refinance, renew, replace, or refund the Notes,
Existing Indebtedness or Indebtedness referred to in clauses (a), (b), (c),
(d) or (e) above or Indebtedness incurred pursuant to the preceding paragraph
(the "Refinancing Indebtedness"); provided, however, that (1) the principal
amount of, and any premium payable in respect of, such Refinancing
Indebtedness shall not exceed the principal amount of Indebtedness so
extended, refinanced, renewed, replaced or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (2) the Refinancing
Indebtedness shall have (A) a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, and (B) a stated
maturity no earlier than the stated maturity of, the Indebtedness being
extended, refinanced, renewed, replaced or refunded; and (3) the Refinancing
Indebtedness shall be subordinated in right of payment to the Notes as and to
the extent of the Indebtedness being extended, refinanced, renewed, replaced
or refunded, (g) the issuance of the Preferred Stock in lieu of payment of
cash interest on the Subordinated Debentures or the incurrence by the Company
of Indebtedness represented by the Subordinated Debentures upon the exchange
of the Preferred Stock in accordance with the Certificate of Designations
therefor, (h) Indebtedness under Exchange Rate Contracts, provided that such
Exchange Rate Contracts are related to payment obligations under Existing
Indebtedness or Indebtedness incurred under this paragraph or the preceding
paragraph that are being hedged thereby, and not for speculation and that the
aggregate notional amount under each such Exchange Rate Contract does not
exceed the aggregate payment obligations under such Indebtedness,
(i) Indebtedness under Interest Rate Agreements, provided that the obligations
under such agreements are related to payment obligations on Existing
Indebtedness or Indebtedness otherwise incurred pursuant to this paragraph or
the preceding paragraph, and not for speculation, (j) the incurrence of
Indebtedness between the Company and any Restricted Subsidiary, between or
among Restricted Subsidiaries and between any Restricted Subsidiary and other
holders of Equity Interests of such Restricted Subsidiary (or other Persons
providing funding on their behalf) on a pro rata basis and on substantially
identical principal financial terms, provided, however, that if any such
Restricted Subsidiary that is the payee of any such Indebtedness ceases to be
a Restricted Subsidiary or transfers such Indebtedness (other than to the
Company or a Restricted Subsidiary of the Company), such events shall be
deemed, in each case, to constitute the incurrence of such Indebtedness by the
Company or by a Restricted Subsidiary, as the case may be, at the time of such
event, and (k) Indebtedness of the Company and/or any Restricted Subsidiary in
respect of performance bonds of the Company or any Subsidiary or surety bonds
provided by the Company or any Restricted Subsidiary received in the ordinary
course of business in connection with the construction or operation of a Cable
Business.
Any redesignation of a Non-Restricted Subsidiary as a Restricted Subsidiary
shall be deemed for purposes of the foregoing covenant to be an incurrence of
Indebtedness by the Company and its Restricted Subsidiaries of the
Indebtedness of such Non-Restricted Subsidiary as of the time of such
redesignation to the extent such Indebtedness does not already constitute
Indebtedness of the Company or one of its Restricted Subsidiaries.
Liens
The Indentures will provide that neither the Company nor any of its
Restricted Subsidiaries may directly or indirectly create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except: (i) Permitted Liens; (ii) Liens securing Indebtedness and
related obligations incurred under clauses (a), (b), (c), (d), (e), (h), (i)
and (k) of the second paragraph of the "Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant; (iii) Liens on the assets acquired or
leased with the proceeds of Indebtedness permitted to be incurred under the
"Incurrence of Indebtedness and Issuance of Preferred Stock" covenant; and
(iv) Liens securing
54
<PAGE>
Refinancing Indebtedness permitted to be incurred under the "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant; provided that the
Refinancing Indebtedness so issued and secured by such Lien shall not be
secured by any property or assets of the Company or any of its Restricted
Subsidiaries other than the property or assets subject to the Liens securing
such Indebtedness being refinanced.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (a)(i) pay
dividends or make any other distributions to the Company or any of its
Subsidiaries (A) on its Capital Stock or (B) with respect to any other
interest or participation in, or measured by, its profits, or (ii) pay any
indebtedness owed to the Company or any of its Subsidiaries or (b) make loans
or advances to the Company or any of its Subsidiaries or (c) transfer any of
its properties or assets to the Company or any of its Subsidiaries, except for
such encumbrances or restrictions existing under or by reason of (i) Existing
Indebtedness as in effect on the Issuance Date, (ii) the Indentures and the
Notes, (iii) any agreement covering or relating to Indebtedness permitted to
be incurred under clause (a), (b), (c), (d), (e), (h) or (i) (but only, in the
case of clause (h) or (i), to the extent contemplated by the then-existing
Credit Facility) of the second paragraph of the "Incurrence of Indebtedness
and Issuance of Preferred Stock" covenant, provided that the provisions of
such agreement permit any action referred to in clause (a) above in aggregate
amounts sufficient to enable the payment of interest and principal and
mandatory repurchases pursuant to the terms of the Indentures and the Notes
but provided further that: (x) any such agreement may nevertheless encumber,
prohibit or restrict any action referred to in clause (a) above if an event of
default under such agreement has occurred and is continuing or would occur as
a result of any such action; and (y) any such agreement may nevertheless
contain (I) restrictions limiting the payment of dividends or the making of
any other distributions to all or a portion of excess cash-flow (or any
similar formulation thereof) and (II) subordination provisions governing
Indebtedness owed to the Company or any Restricted Subsidiary, (iv) applicable
law, (v) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was incurred in
connection with such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired;
provided that the EBITDA of such Person is not taken into account in
determining whether such acquisition was permitted by the terms of the
Indentures, (vi) customary nonassignment provisions in leases entered into in
the ordinary course of business and consistent with past practices, (vii)
provisions of joint venture or stockholder agreements, so long as such
provisions are determined by a resolution of the Board of Directors to be, at
the time of such determination, customary for such agreements, (viii) with
respect to clause (c) above, purchase money obligations for property acquired
in the ordinary course of business or the provisions of any agreement with
respect to any Asset Sale (or transaction which, but for its size, would be an
Asset Sale), solely with respect to the assets being sold, or (ix) permitted
Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Refinancing Indebtedness are determined by a
resolution of the Board of Directors to be no more restrictive than those
contained in the agreements governing the Indebtedness being refinanced.
Merger, Consolidation or Sale of Assets
The Indentures will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions to, another corporation, Person or entity unless (i) the Company
is the surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the
Cayman Islands or of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
55
<PAGE>
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made assumes all the Obligations (including the due and
punctual payment of Additional Amounts (as defined in the Indentures) if the
surviving corporation is a corporation organized or existing under the laws of
the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the
Cayman Islands) of the Company, pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee, under the Notes and the Indentures;
(iii) immediately after such transaction no Default or Event of Default
exists; (iv) the Company or any entity or Person formed by or surviving any
such consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made will have a ratio
of Indebtedness to Annualized Pro Forma EBITDA equal to or less than the ratio
of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately
preceding the transaction provided, however, that if the ratio of Indebtedness
to Annualized Pro Forma EBITDA of the Company immediately preceding such
transaction is 6:1 or less, then the ratio of Indebtedness to Annualized Pro
Forma EBITDA of the Company may be 0.5 greater than such ratio immediately
preceding such transaction; and (v) such transaction would not result in the
loss of any material authorization or Material License of the Company or its
Subsidiaries.
Additional Amounts; Optional Tax Redemption
The Indentures will provide that the "Payment of Additional Amounts"
provision therein, relating to United Kingdom, Netherlands, Netherlands
Antilles, Bermuda and Cayman Islands withholding and other United Kingdom,
Netherlands, Netherlands Antilles, Bermuda and Cayman Islands taxes, and the
"Optional Tax Redemption" provision therein, relating to the Company's option
to redeem the Notes under certain circumstances if Additional Amounts are
payable, apply to the Notes in certain circumstances. The provisions of the
Indenture relating to the payment of Additional Amounts will only apply in the
event that the Company becomes, or a successor to the Company is, a
corporation organized or existing under the laws of the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. In such
circumstances, all payments made by the Company on the Notes will be made
without deduction or withholding, for or on account of, any and all present or
future taxes, duties, assessments, or governmental charges of whatever nature
unless the deduction or withholding of such taxes, duties, assessments or
governmental charges is then required by law. If any deduction or withholding
for or on account of any present or future taxes, assessments or other
governmental charges of the United Kingdom, the Netherlands, the Netherlands
Antilles, Bermuda or the Cayman Islands (or any political subdivision or
taxing authority thereof or therein) shall at any time be required in respect
of any amounts to be paid by the Company under the Notes, the Company will pay
or cause to be paid such additional amounts ("Additional Amounts") as may be
necessary in order that the net amounts received by a holder of the Notes
after such deduction or withholding shall be not less than the amounts
specified in the Notes to which the holder of such Notes is entitled;
provided, however, that the Company shall not be required to make any payment
of Additional Amounts for or on account of:
(a) any tax, assessment or other governmental charge to the extent such
tax, assessment or other governmental charge would not have been imposed
but for (i) the existence of any present or former connection between such
holder (or between a fiduciary, settlor, beneficiary, member or shareholder
of, or possessor of a power over, such holder, if such holder is an estate,
nominee, trust, partnership or corporation), other than the holding of the
Notes or the receipt of amounts payable in respect of the Notes and the
United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the
Cayman Islands or any political subdivision or taxing authority thereof or
therein, including, without limitation, such holder (or such fiduciary,
settlor, beneficiary, member, shareholder or possessor) being or having
been a citizen or resident thereof or being or having been present or
engaged in trade or business therein or having had a permanent
establishment therein or (ii) the presentation of the Notes (where
presentation is required) for payment on a date more than 30 days after the
date on which such payment became due and payable or the date on which
payment thereof is duly provided for, whichever occurs later, except to the
extent that the holder would have been entitled to Additional Amounts had
the Notes been presented on the last day of such period of 30 days;
56
<PAGE>
(b) any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure to comply by the holder of the Notes or,
if different, the beneficial owner of the interest payable on the Notes,
with a timely request of the Company addressed to such holder or beneficial
owner to provide information, documents or other evidence concerning the
nationality, identity or connection with the taxing jurisdiction of such
holder or beneficial owner which is required or imposed by a statute,
regulation or administrative practice of the taxing jurisdiction as a
precondition to exemption from all or part of such tax assessment or
governmental charge;
(c) any estate, inheritance, gift, sales, transfer, personal property or
similar tax assessment or other governmental charge;
(d) any tax assessment or other governmental charge which is collectible
otherwise than by withholding from payments of principal amount, redemption
amount, Change of Control Payment or interest with respect to a Note or
withholding from the proceeds of a sale or exchange of a Note;
(e) any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal amount,
redemption amount, Change of Control Payment or interest with respect to a
Note, if such payment can be made, and is in fact made, without such
withholding by any other paying agent located inside the United States;
(f) any tax, assessment or other governmental charge imposed on a holder
that is not the beneficial owner of a Note to the extent that the
beneficial owner would not have been entitled to the payment of any such
Additional Amounts had the beneficial owner directly held the Note;
(g) any combination of items (a), (b), (c), (d), (e) and (f) above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any interest on the Notes to any holder who is a fiduciary or
partnership or other than the sole beneficial owner of such payment to the
extent that a beneficiary or settlor would not have been entitled to any
Additional Amounts had such beneficiary or settlor been the holder of the
Notes.
The Notes may be redeemed at the option of the Company, in whole but not in
part, upon not less than 30 nor more than 60 days notice, at any time at a
redemption price equal to the principal amount thereof plus accrued and unpaid
interest to the date fixed for redemption (or in the case of redemption of
Sterling Deferred Coupon Notes or USD Deferred Coupon Notes at a redemption
price equal to 100% of the Accreted Value thereof as of the date of purchase)
if after the Issuance Date there has occurred any change in or amendment to
the laws (or any regulations or official rulings promulgated thereunder) of
the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the
Cayman Islands (or any political subdivision or taxing authority thereof or
therein), or any change in or amendment to the official application or
interpretation of such laws, regulation or rulings (a "Change in Tax Law")
which becomes effective after the Issuance Date, as a result of which the
Company is or would be so required on the next succeeding Interest Payment
Date to pay Additional Amounts with respect to the Notes with respect to
withholding taxes imposed by the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands, (or any political
subdivision or taxing authority thereof or therein) (a "Withholding Tax") and
such Withholding Tax is imposed at a rate that exceeds the rate (if any) at
which Withholding Tax was imposed on the Issuance Date provided, that, (i)
this paragraph shall not apply to the extent that, at the Relevant Date it was
known or would have been known had professional advice of a nationally
recognized accounting firm in the United Kingdom, Netherlands, Netherlands
Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that
a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands
Antilles, Bermuda or the Cayman Islands, was to occur after the Issuance Date,
(ii) no such notice of redemption may be given earlier than 90 days prior to
the earliest date on which the Company would be obliged to pay such Additional
Amounts were a payment in respect of the Notes then due, (iii) at the time
such notice of redemption is given, such obligation to pay such Additional
Amount remains in effect and (iv) the payment of such Additional Amounts
cannot be avoided by the use of any reasonable measures available to the
Company.
57
<PAGE>
The Notes may also be redeemed, in whole but not in part, at any time at a
redemption price equal to the principal amount thereof plus accrued and unpaid
interest to the date fixed for redemption if the person formed after the
Issuance Date by a consolidation, amalgamation, reorganization or
reconstruction (or other similar arrangement) of the Company or the person
into which the Company is merged after the Issuance Date or to which the
Company conveys, transfers or leases its properties and assets after the
Issuance substantially as an entirety (collectively, a "Subsequent
Consolidation") is required, as a consequence of such Subsequent Consolidation
and as a consequence of a Change in Tax Law in the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands occurring
after the date of such Subsequent Consolidation to pay Additional Amounts with
respect to Notes with respect to Withholding Tax and such Withholding Tax is
imposed at a rate that exceeds the rate (if any) at which Withholding Tax was
or would have been imposed on the date of such Subsequent Consolidation,
provided, however, that this paragraph shall not apply to the extent that, at
the date of such Subsequent Consolidation it was known or would have been
known had professional advice of a nationally recognized accounting firm in
the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the
Cayman Islands, as the case may be, been sought, that a Change in Tax Law in
the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the
Cayman Islands, was to occur after such date.
The Company will also pay, or make available for payment, to holders on the
redemption date any Additional Amounts resulting from the payment of such
redemption price.
Transactions with Affiliates
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or amend any contract, agreement, understanding,
loan, advance or guarantee with, or for the benefit of, any Affiliate (each of
the foregoing, an "Affiliate Transaction"), unless (a) such Affiliate
Transaction is on terms that are no less favorable to the Company or the
relevant Subsidiary than those that could have been obtained in a comparable
transaction by the Company or such Subsidiary with an unrelated Person and (b)
the Company delivers to the Trustee (i) with respect to any Affiliate
Transaction involving aggregate payments in excess of $1 million or any series
of Affiliate Transactions with an Affiliate involving aggregate payments in
excess of $1 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (a) above and such Affiliate Transaction is approved by a majority of
the disinterested directors on the Board of Directors and (ii) with respect to
any Affiliate Transaction or any series of Affiliate Transactions involving
aggregate payments in excess of $25 million, an opinion as to the fairness to
the Company or such Subsidiary from a financial point of view issued by an
investment banking firm of national standing with high yield experience
together with an Officers' Certificate to the effect that such opinion
complies with this clause (ii); provided, however, that notwithstanding the
foregoing provisions, the following shall not be deemed to be Affiliate
Transactions: (i) any employment agreement entered into by the Company or any
of its Subsidiaries in the ordinary course of business and consistent with the
past practice of the Company or its predecessor or such Subsidiary; (ii)
transactions between or among the Company and/or its Restricted Subsidiaries;
(iii) transactions permitted by the provisions of the Indentures described
above under the covenant "Restricted Payments"; (iv) Liens permitted under the
Liens covenant which are granted by the Company or any of its Subsidiaries to
an unrelated Person for the benefit of the Company or any other Subsidiary of
the Company; (v) any transaction pursuant to an agreement in effect on the
Issuance Date; (vi) the incurrence of Indebtedness by a Restricted Subsidiary
where such Indebtedness is owed to the holders of the Equity Interests of such
Restricted Subsidiary on a pro rata basis and on substantially identical
principal financial terms; (vii) management, operating, service or
interconnect agreements entered into in the ordinary course of business with
any Cable Business in which the Company or any Restricted Subsidiary has an
Investment and which is not a Cable Controlled Subsidiary (and of which no
Affiliate of the Company is an Affiliate other than as a result of such
Investment); and (viii) any tax sharing agreement.
Reports
Whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, the Company will file with the Commission
and furnish to the holders of Notes all quarterly and
58
<PAGE>
annual financial information required to be contained in a filing with the
Commission on Forms 10-Q and 10-K (or the equivalent thereof under the
Exchange Act for foreign private issuers in the event the Company becomes a
corporation organized under the laws of the United Kingdom, the Netherlands,
the Netherlands Antilles, Bermuda or the Cayman Islands), including a
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants, in each case, as required
by the rules and regulations of the Commission as in effect on the Issuance
Date. As long as the Notes are listed on the Luxembourg Stock Exchange, copies
of such reports will also be available at the specified office of the listing,
paying and transfer agent in Luxembourg. The Company does not publish
unconsolidated financial reports.
EVENTS OF DEFAULT AND REMEDIES
The Indentures will provide that each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due of interest (and
Additional Amounts, if applicable) on the Notes; (ii) default in payment when
due of principal on the Notes; (iii) failure by the Company to comply with the
provisions described under the covenants "Change of Control," "Restricted
Payments" or "Incurrence of Indebtedness and Issuance of Preferred Stock";
(iv) failure by the Company for 60 days after notice to comply with certain
other covenants and agreements contained in the Indentures or the Notes; (v)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries), whether such Indebtedness or guarantee now exists, or is
created after the Issuance Date, which default (a) is caused by a failure to
pay when due principal or interest on such Indebtedness within the grace
period provided in such Indebtedness (which failure continues beyond any
applicable grace period) (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$10 million or more; (vi) failure by the Company or any Restricted Subsidiary
of the Company to pay final judgments (other than any judgment as to which a
reputable insurance company has accepted full liability) aggregating in excess
of $5 million, which judgments are not stayed within 60 days after their
entry; (vii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Material Subsidiaries; and (viii) the revocation of a
Material License.
If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of each then outstanding class of Notes
may declare all the applicable class of Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, with respect to the
Company or any Material Subsidiary, all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
the Indentures or the Notes except as provided in the Indentures. Subject to
certain limitations, holders of a majority in principal amount of each then
outstanding class of Notes may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
The holders of a majority in aggregate principal amount of each class of
Notes then outstanding by notice to the Trustee may on behalf of the holders
of all of the applicable class of Notes waive any existing Default or Event of
Default and its consequences under the Indentures except a continuing Default
or Event of Default in the payment of interest on, or the principal of, the
applicable class of Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indentures, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the Company,
as such, shall have any liability for any Obligations of the Company under the
Notes or the Indentures or for any claim based on, in respect of,
59
<PAGE>
or by reason of, such Obligations or their creation. Each holder of the Notes
by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver
may not be effective to waive liabilities under the federal securities laws,
and it is the view of the Commission that a waiver of such liabilities is
against public policy.
DEFEASANCE AND DISCHARGE OF THE INDENTURES AND THE NOTES
If the Company irrevocably deposits, or causes to be deposited, in trust
with the Trustee or the Paying Agent, at any time prior to the stated maturity
of a class of Notes or the date of redemption of all the outstanding Notes of
such class, as trust funds in trust, money or direct noncallable obligations
of or guaranteed by the United States of America in an amount sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
(without reinvestment thereof) to pay timely and discharge the entire
principal of (or, if applicable, all amounts payable in respect of Accreted
Value) the then outstanding Notes of such class and all interest due thereon
to maturity or redemption, the applicable Indenture shall cease to be of
further effect as to all outstanding Notes of such class ("Defeasance")
(except, among other things, as to (i) remaining rights of registration of
transfer and substitution and exchange of the Notes of such class, (ii) rights
of holders to receive payment of principal of (or, if applicable, payments in
respect of Accreted Value) and interest on the Notes of such class, and (iii)
the rights, obligations and immunities of the Trustee).
In order to exercise Defeasance: (i) the Company shall have delivered to the
Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service, a ruling or (B) since the date of the applicable
Indenture, there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon, such Opinion of Counsel
shall confirm that the holders of the outstanding Notes of the applicable
class will not recognize income, gain or loss for federal income tax purposes
as a result of such Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Defeasance had not occurred; (ii) no Event of Default shall
have occurred and be continuing on the date of such deposit (other than an
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit; (iii) such Defeasance shall not result in a breach or violation
of, or constitute a default under, any material agreement or instrument (other
than the Indenture) to which the Company or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries is bound; (iv) the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that
after the 91st day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally; (v) the Company shall have
delivered to the Trustee an Officers' Certificate stating that the deposit was
not made by the Company with the intent of preferring the holders of Notes
over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; (vi) the
deposit shall not result in the Company, the Trustee or the trust being
subject to the Investment Company Act of 1940; (vii) holders of the Notes of
the applicable class will have a valid, perfected and unavoidable (under
applicable bankruptcy or insolvency laws), subject to the passage of time
referred to in clause (iv) above, first priority security interest in the
trust funds; and (viii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent relating to the Defeasance have been complied with.
UNCLAIMED MONEY, PRESCRIPTION
If money deposited with the Trustee or Paying Agent for the payment of
principal or interest remains unclaimed for two years, the Trustee and the
Paying Agent shall pay the money back to the Company at its written request.
After that, holders of Notes entitled to the money must look to the Company
for payment unless an abandoned property law designates another person and all
liability of the Trustee and such Paying Agent shall cease. Other than as set
forth in this paragraph, the Indentures do not provide for any prescription
period for the payment of interest and principal on the Notes.
60
<PAGE>
TRANSFER AND EXCHANGE
A holder may transfer or exchange interests in the Notes in accordance with
procedures described in "Book-Entry; Delivery and Form." The Registrar and the
Trustee may require a holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a holder to
pay any taxes and fees required by law or permitted by the Indentures. The
Company is not required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, any Indenture or class
of Notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the then outstanding Notes to which
such Indenture applies (including consents obtained in connection with a
tender offer or exchange offer for such Notes), and any existing default or
compliance with any provision of any Indenture or class of Notes may be waived
with the consent of the holders of a majority in principal amount of the then
outstanding Notes to which such Indenture applies (including consents obtained
in connection with a tender offer or exchange offer for such Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder of Notes) (i)
reduce the amount of Notes whose holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the redemption of
the Notes (but not any required repurchases of the Notes pursuant to the
covenants described above under the captions "--Asset Sales" and "--Change of
Control"), (iii) reduce the rate of or change the time for payment of interest
on any Note, (iv) waive a default in the payment of principal of or interest
on any Notes (except a rescission of acceleration of the Notes by the holders
of at least a majority in aggregate principal amount of the Notes and a waiver
of the payment default that resulted from such acceleration), (v) make any
Note payable in money other than that stated in the Notes, (vi) make any
change in the provisions of any Indenture relating to waivers of past Defaults
or the rights of holders of Notes to receive payments of principal of or
interest on the Notes, (vii) waive a redemption payment with respect to any
Note or (viii) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement any Indenture or class of
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to holders of the
Notes in the case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the holders of the Notes or that
does not adversely affect the legal rights under any Indenture of any such
holder, or to comply with requirements of the Commission in order to maintain
the qualification of any Indenture under the Trust Indenture Act.
Any notice or communication to a holder of Notes shall be mailed by first-
class mail to such holder's address as shown in the register kept by the
Registrar. If a notice or communication is mailed in the manner provided in
the preceding sentence within the time period prescribed, it is duly given,
whether or not the addressee receives it. In addition, as long as the Notes
are listed on the Luxembourg Stock Exchange, all notices regarding the Notes
shall be published in English in one leading newspaper with circulation in
Luxembourg. It is expected that publication of notices will normally be made
in the Luxembourger Wort in Luxembourg.
GOVERNING LAW AND JUDGMENTS
The Notes and the Indentures will be governed exclusively by the laws of the
State of New York. Under the Judiciary Law of the State of New York, a
judgment or decree in an action based upon an obligation
61
<PAGE>
denominated in a currency other than U.S. dollars will be rendered in the
foreign currency of the underlying obligation and converted into U.S. dollars
at a rate of exchange prevailing on the date of the entry of the judgment or
decree.
CONCERNING THE TRUSTEE
The Indentures contain limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The holders of a majority in principal amount of any class of then
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee
under the applicable Indenture, subject to certain exceptions. The Indentures
provide that in case an Event of Default shall occur (which shall not be
cured), the Trustee will be required, in the exercise of its power, to use the
degree of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indentures at the request of any holder of
Notes, unless such holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
The Chase Manhattan Bank is also the trustee for all of the Existing Notes
and the Convertible Notes.
LISTING
Application will be made to list the New Notes on the Luxembourg Stock
Exchange. The legal notice relating to the issue of the Notes and the Articles
of Association of the Company will be registered prior to the listing with the
Registrar of the District Court in Luxembourg, where such documents are
available for inspection and where copies thereof can be obtained upon
request. In addition, as long as the Notes are listed on the Luxembourg Stock
Exchange, an agent for making payments on, and transfers of, Notes will be
maintained in Luxembourg. The Company has initially designated Banque
Internationale a Luxembourg S.A. as its agent for such purposes.
ADDITIONAL INFORMATION
Anyone who receives this Offering Memorandum may obtain a copy of the
Indentures without charge by writing to the Company, 110 East 59th Street, New
York, New York 10022, Attention: Richard J. Lubasch, Esq., Senior Vice
President, General Counsel and Secretary. As long as the Notes are listed on
the Luxembourg Stock Exchange, copies of the Indentures will also be available
from the specified office of the listing, paying and transfer agent in
Luxembourg.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indentures. Reference
is made to the Indentures for a full definition of all terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Accreted Value" means, as of any date of determination prior to April 1,
2003, with respect to any Sterling Deferred Coupon Note or USD Deferred Coupon
Note, as applicable, the sum of (a) the initial offering price (which shall be
calculated by discounting the aggregate principal amount at maturity of such
Sterling Deferred Coupon Note or USD Deferred Coupon Note, as applicable, at a
rate of 10.75% per annum (in the case of a Sterling Deferred Coupon Note) or
9.75% per annum (in the case of a USD Deferred Coupon Note), compounded
semiannually on each April 1 and October 1 from October 1, 2003 to the date of
issuance) of such Sterling Deferred Coupon Note or USD Deferred Coupon Note,
as applicable, and (b) the portion of the excess of the principal amount of
such Sterling Deferred Coupon Note or USD Deferred Coupon Note, as applicable,
over
62
<PAGE>
such initial offering price which shall have been accreted thereon through
such date, such amount to be so accreted on a daily basis at a rate of 10.75%
per annum of the initial offering price of a Sterling Deferred Coupon Note or
9.75% per annum of the initial offering price of a USD Deferred Coupon Note,
as the case may be, compounded semiannually on each April 1 and October 1 from
the date of issuance of the Sterling Deferred Coupon Note or USD Deferred
Coupon Note, as applicable, through the date of determination, computed on the
basis of a 360-day year of twelve 30-day months.
"Acquired Debt" means, with respect to any specified Person, Indebtedness of
any other Person (the "Acquired Person") existing at the time such Acquired
Person merged with or into or became a Subsidiary of such specified Person,
including Indebtedness incurred in connection with, or in contemplation of,
such Acquired Person merging with or into or becoming a Subsidiary of such
specified Person.
"Acquired Person" has the meaning specified in the definition of Acquired
Debt.
"Adjusted Total Assets" means the total amount of assets of the Company and
its Restricted Subsidiaries (including the amount of any Investment in any
Non-Restricted Subsidiary), except to the extent resulting from write-ups of
assets (other than write-ups in connection with accounting for acquisitions in
conformity with GAAP), after deducting therefrom (i) all current liabilities
of the Company and its Restricted Subsidiaries, and (ii) all goodwill, trade
names, trademarks, patents, unamortized debt discount and expense and other
like intangibles, all as calculated in conformity with GAAP. For purposes of
this Adjusted Total Assets definition, (a) assets shall be calculated less
applicable accumulated depreciation, accumulated amortization and other
valuation reserves, and (b) all calculations shall exclude all intercompany
items.
"Adjusted Total Controlled Assets" means the total amount of assets of the
Company and its Cable Controlled Subsidiaries, except to the extent resulting
from write-ups of assets (other than write-ups in connection with accounting
for acquisitions in conformity with GAAP), after deducting therefrom (i) all
current liabilities of the Company and such Cable Controlled Subsidiaries; and
(ii) all goodwill, trade names, trademarks, patients, unamortized debt
discount and expense and other like intangibles of the Company and such
Restricted Subsidiaries, all as calculated in conformity with GAAP; provided
that Adjusted Total Controlled Assets shall be reduced (to the extent not
otherwise reduced in accordance with GAAP) by an amount equal to the aggregate
amount of all Investments of the Company or any such Cable Controlled
Subsidiaries in any Person other than a Cable Controlled Subsidiary, except
Cash Equivalents. For purposes of this Adjusted Total Controlled Assets
definition, (a) assets shall be calculated less applicable accumulated
depreciation, accumulated amortization and other valuation reserves, and (b)
all calculations shall exclude all intercompany items.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided, however, that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control.
"Annualized Pro Forma EBITDA" means, with respect to any Person, such
Person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four.
"Applicable Notes" means the Company's 10 7/8% Senior Deferred Coupon Notes
Due 2003.
"Asset Sale" means (i) any sale, lease, transfer, conveyance or other
disposition of any assets (including by way of a sale-and-leaseback) other
than the sale or transfer of inventory or goods held for sale in the ordinary
course of business (provided that the sale, lease, transfer, conveyance or
other disposition of all or substantially all of the assets of the Company
shall be governed by the provisions of the Indentures described under the
captions "Change of Control" or "Merger, Consolidation or Sale of Assets") or
(ii) any issuance, sale, lease,
63
<PAGE>
transfer, conveyance or other disposition of any Equity Interests of any of
the Company's Restricted Subsidiaries to any Person; in either case other than
(A) to (w) the Company, (x) any Wholly Owned Subsidiary, or (y) any Subsidiary
which is a Subsidiary of the Company on the Issuance Date provided that at the
time of and after giving effect to such issuance, sale, lease, transfer,
conveyance or other disposition to such Subsidiary, the Company's ownership
percentage in such Subsidiary is equal to or greater than such percentage on
the Issuance Date or (B) the issuance, sale, transfer, conveyance or other
disposition of Equity Interests of a Subsidiary in exchange for capital
contributions made on a pro rata basis by the holders of the Equity Interests
of such Subsidiary.
"Cable Assets" means tangible or intangible assets, licenses (including,
without limitation, Licenses) and computer software used in connection with a
Cable Business.
"Cable Business" means (i) any Person directly or indirectly operating, or
owning a license to operate, a cable and/or television and/or telephone and/or
telecommunications system or service principally within the United Kingdom
and/or the Republic of Ireland and (ii) any Cable Related Business.
"Cable Controlled Property" means a Cable Controlled Subsidiary or a Cable
Asset held by a Cable Controlled Subsidiary.
"Cable Controlled Subsidiary" means any Restricted Subsidiary which is
primarily engaged, directly or indirectly, in one or more Cable Businesses.
"Cable Related Business" means a Person which directly or indirectly owns or
provides a service or product used in a Cable Business, including, without
limitation, any television programming, production and/or licensing business
or any programming guide or telephone directory business or content or
software related thereto.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including,
without limitation, partnership interests.
"Capital Stock Sale Proceeds" means the aggregate net sale proceeds
(including from the sale of any property received for the Capital Stock or the
fair market value of such property, as determined by an independent appraisal
firm) received by the Company or any Subsidiary of the Company from the issue
or sale (other than to a Subsidiary) by the Company of any class of its
Capital Stock after October 14, 1993 (including Capital Stock of the Company
issued after October 14, 1993 upon conversion of or in exchange for other
securities of the Company).
"Cash Equivalents" means (i) Permitted Currency, (ii) securities issued or
directly and fully guaranteed or insured by the United States government, a
European Union member government or any agency or instrumentality thereof
having maturities of not more than six months and one day from the date of
acquisition, (iii) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any commercial bank(s) domiciled in the United
States, the United Kingdom, the Republic of Ireland or any other European
Union member having capital and surplus in excess of $500 million, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) entered into with
any financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper rated P-1 or the equivalent thereof by Moody's or
A-1 or the equivalent thereof by S&P and in each case maturing within six
months and one day after the date of acquisition and (vi) money market funds
at least 95% of the assets of which constitute Cash Equivalents of the kinds
described in clauses (i)-(v) of this definition.
"Change of Control" means (i) the sale, lease or transfer of all or
substantially all of the assets of the Company to any "Person" or "group"
(within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or
any successor provision to either of the foregoing, including any group acting
for the purpose of acquiring,
64
<PAGE>
holding or disposing of securities within the meaning of Rule 13d-5(b)(1)
under the Exchange Act) (other than any Permitted Holder), (ii) the approval
by the requisite stockholders of the Company of a plan of liquidation or
dissolution of the Company, (iii) any "Person" or "group" (within the meaning
of Sections 13(d) and 14(d)(2) of the Exchange Act or any successor provision
to either of the foregoing, including any group acting for the purpose of
acquiring, holding or disposing of securities within the meaning of Rule 13d-
5(b)(1) under the Exchange Act), other than any Permitted Holder, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 50% of the total voting power of all classes of the voting stock of the
Company and/or warrants or options to acquire such voting stock, calculated on
a fully diluted basis, unless, as a result of such transaction, the ultimate
direct or indirect ownership of the Company is substantially the same
immediately after such transaction as it was immediately prior to such
transaction, or (iv) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Company's Board of
Directors (together with any new directors whose election or appointment by
such board or whose nomination for election by the shareholders of the Company
was approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Company's Board of Directors then in office.
"Change of Control Triggering Event" means the occurrence of both a Change
of Control and a Ratings Decline.
"Consolidated Interest Expense" means, for any Person, for any period, the
amount of interest in respect of Indebtedness (including amortization of
original issue discount, amortization of debt issuance costs, and non-cash
interest payments on any Indebtedness and the interest portion of any deferred
payment obligation and after taking into account the effect of elections made
under any Interest Rate Agreement, however denominated, with respect to such
Indebtedness), the amount of Redeemable Dividends, Restricted Subsidiary
Preferred Stock Dividends and the interest component of rentals in respect of
any capital lease obligation paid, in each case whether accrued or scheduled
to be paid or accrued by such Person and its Subsidiaries (other than Non-
Restricted Subsidiaries) during such period to the extent such amounts were
deducted in computing Consolidated Net Income, determined on a consolidated
basis in accordance with GAAP. For purposes of this definition, interest on a
capital lease obligation shall be deemed to accrue at an interest rate
reasonably determined by such Person to be the rate of interest implicit in
such capital lease obligation in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries (other
than Non-Restricted Subsidiaries) for such period, on a consolidated basis,
determined in accordance with GAAP; provided, that (i) the Net Income of any
Person that is not a Subsidiary or that is accounted for by the equity method
of accounting shall be included only to the extent of the amount of dividends
or distributions paid to the referent Person or a Wholly Owned Subsidiary,
(ii) the Net Income of any Person that is a Subsidiary (other than a
Subsidiary of which at least 80% of the Capital Stock having ordinary voting
power for the election of directors or other governing body of such Subsidiary
is owned by the referent Person directly or indirectly through one or more
Subsidiaries) shall be included only to the extent of the amount of dividends
or distributions paid to the referent Person or a Wholly Owned Subsidiary,
(iii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Convertible Subordinated Notes" means the Company's 7 1/4% Convertible
Subordinated Notes issued pursuant to an indenture dated as of April 20, 1995,
between the Company and The Chase Manhattan Bank (formerly known as Chemical
Bank), as trustee, and the Company's 7% Convertible Subordinated Notes issued
pursuant to an indenture dated as of June 12, 1996 also between the Company
and The Chase Manhattan Bank (formerly known as Chemical Bank), as trustee.
"Credit Facility" means the Facilities Agreement dated October 17, 1997
between NTL (UK) Group Inc., as principal guarantor, Chase Manhattan plc, as
arranger, Chase Manhattan International Limited, as agent and security trustee
and the Chase Manhattan Bank as issuer, as such Facilities Agreement may be
supplemented,
65
<PAGE>
amended, restated, modified, renewed, refunded, replaced or refinanced, in
whole or in part, from time to time in an aggregate outstanding principal
amount not to exceed the greater of (i) (Pounds)555 million and (ii) the
amount of the aggregate commitments thereunder as the same may be increased
after the date of the Indenture as contemplated by the Facilities Agreement as
amended or supplemented to the date of the Indenture, but in no event greater
than (Pounds)875 million, less, in each case, the aggregate amount of all Net
Proceeds of Asset Sales that have been applied to permanently reduce
Indebtedness under the Credit Facility pursuant to the covenant described
above under "--Asset Sales." Indebtedness that may otherwise be incurred under
the Indentures may, but need not, be incurred under the Credit Facility
without regard to the limit set forth in the preceding sentence. Indebtedness
outstanding under the Credit Facility on the date of the Indenture shall be
deemed to have been incurred on such date in reliance on the exception
provided by clause (a) of the second paragraph of the covenant described above
under "--Incurrence of Indebtedness and Issuance of Preferred Stock."
"Cumulative EBITDA" means the cumulative EBITDA of the Company from and
after the Issuance Date to the end of the fiscal quarter immediately preceding
the date of a proposed Restricted Payment, or, if such cumulative EBITDA for
such period is negative, minus the amount by which such cumulative EBITDA is
less than zero; provided, however, that EBITDA of Non-Restricted Subsidiaries
shall not be included.
"Cumulative Interest Expense" means the aggregate amount of Consolidated
Interest Expense paid, accrued or scheduled to be paid or accrued by the
Company from the Issuance Date to the end of the fiscal quarter immediately
preceding a proposed Restricted Payment, determined on a consolidated basis in
accordance with GAAP.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date on which the Notes mature.
"EBITDA" means, for any Person, for any period, an amount equal to (A) the
sum of (i) Consolidated Net Income for such period (exclusive of any gain or
loss realized in such period upon an Asset Sale), plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income and any provision
for taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period, plus (iv) depreciation for such
period on a consolidated basis, plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other non-cash item reducing
Consolidated Net Income for such period (excluding any such non-cash item to
the extent that it represents an accrual of or reserve for cash expenses in
any future period or amortization of a prepaid cash expense that was paid in a
prior period), minus (B) all non-cash items increasing Consolidated Net Income
for such period, all for such Person and its Subsidiaries determined in
accordance with GAAP consistently applied.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any Indebtedness that is
convertible into, or exchangeable for, Capital Stock).
"European Union member" means any country that is or becomes a member of the
European Union or any successor organization thereto.
"Exchange Rate Contract" means, with respect to any Person, any currency
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or combination thereof, the principal purpose of
which is to provide protection against fluctuations in currency exchange
rates. An Exchange Rate Contract may also include an Interest Rate Agreement.
66
<PAGE>
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the Issuance Date, until such amounts are repaid,
including, without limitation, the Existing Notes.
"Existing Notes" means the Old Notes and the Convertible Subordinated Notes.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting
profession, which are in effect on the Issuance Date and are applied on a
consistent basis.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the balance
deferred and unpaid of the purchase price of any property (including pursuant
to capital leases and sale-and-leaseback transactions) or representing any
hedging obligations under an Exchange Rate Contract or an Interest Rate
Agreement, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing indebtedness (other
than obligations under an Exchange Rate Contract or an Interest Rate
Agreement) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, and also includes, to the extent not
otherwise included, the Guarantee of items which would be included within this
definition. The amount of any Indebtedness outstanding as of any date shall be
the accreted value thereof, in the case of any Indebtedness issued with
original issue discount.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar
agreement or other similar agreement the principal purpose of which is to
protect the party indicated therein against fluctuations in interest rates.
"Investment Grade" means BBB- or higher by S&P or Baa3 or higher by Moody's
or the equivalent of such ratings by S&P or Moody's. In the event that the
Company shall be permitted to select any other Rating Agency, the equivalent
of such ratings by such Rating Agency shall be used.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans
(including Guarantees), advances or capital contributions (excluding
commission, travel and similar advances and loans, joint property ownership
and other arrangements, in each case, made to officers and employees made in
the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"Issuance Date" means the date on which the Notes are first authenticated
and issued.
"License" means any license issued or awarded pursuant to the Broadcasting
Act 1990, the Cable and Broadcasting Act 1984, the Telecommunications Act 1984
or the Wireless Telegraphy Act 1948 (in each case, as such Acts may, from time
to time be, amended, modified or re-enacted) (or equivalent statutes of any
jurisdiction) to operate or own a Cable Business.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent or successor statutes) of any
jurisdiction).
67
<PAGE>
"Long Distance/Microwave Assets" means any assets, tangible or intangible,
choate or inchoate, primarily used in the business conducted by OCOM
Corporation in the United States as of the Issuance Date.
"Material License" means a License held by the Company or any of its
Subsidiaries which License at the time of determination covers a number of Net
Households which equals or exceeds 5% of the aggregate number of Net
Households covered by all of the Licenses held by the Company and its
Subsidiaries at such time.
"Material Subsidiary" means (i) NTL UK Group, Inc. (formerly known as OCOM
Sub II, Inc.), NTLIH, NTL Group Limited, CableTel Surrey Limited, CableTel
Cardiff Limited, CableTel Glasgow, CableTel Newport and CableTel Kirklees and
(ii) any other Subsidiary of the Company which is a "significant subsidiary"
as defined in Rule 1-02(v) of Regulation S-X under the Securities Act of 1933
and the Exchange Act (as such Regulation is in effect on the date of the
Indentures).
"Monetize" means a strategy with respect to Equity Interests that generates
an amount of cash equal to the fair value of such Equity Interests.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Households" means the product of (i) the number of households covered
by a License in the United Kingdom and (ii) the percentage of the entity
holding such License which is owned directly or indirectly by the Company.
"Net Income" means, with respect to any Person for a specific period, the
net income (loss) of such Person during such period, determined in accordance
with GAAP, excluding, however, any gain (but not loss) during such period,
together with any related provision for taxes on such gain (but not loss),
realized during such period in connection with any Asset Sale (including,
without limitation, dispositions pursuant to sale-and-leaseback transactions),
and excluding any extraordinary gain (but not loss) during such period,
together with any related provision for taxes on such extraordinary gain (but
not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale, net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation
expenses incurred as a result thereof, taxes paid or payable as a result
thereof (after taking into account any available tax credits or deductions and
any tax sharing arrangements), amounts required to be applied to the repayment
of Indebtedness secured by a Lien on the asset or assets the subject of such
Asset Sale and any reserve for adjustment in respect of the sale price of such
asset or assets.
"Non-Controlled Subsidiary" means an entity which is not a Cable Controlled
Subsidiary.
"Non-Recourse Debt" means Indebtedness or that portion of Indebtedness as to
which none of the Company, nor any Restricted Subsidiary: (i) provides credit
support (including any undertaking, agreement or instrument which would
constitute Indebtedness); (ii) is directly or indirectly liable; or (iii)
constitutes the lender.
"Non-Restricted Subsidiary" means (A) a Subsidiary that (a) at the time of
its designation by the Board of Directors as a Non-Restricted Subsidiary has
not acquired any assets (other than as specifically permitted by clause (e) of
"Permitted Investments" or by the "Restricted Payments" covenant), at any
previous time, directly or indirectly from the Company or any of its
Restricted Subsidiaries, (b) has no Indebtedness other than Non-Recourse Debt
and (c) that at the time of such designation, after giving pro forma effect to
such designation, the ratio of Indebtedness to Annualized Pro Forma EBITDA of
the Company is equal to or less than the ratio of Indebtedness to Annualized
Pro Forma EBITDA of the Company immediately preceding such designation,
provided, however, that if the ratio of Indebtedness to Annualized Pro Forma
EBITDA of the Company immediately preceding such designation is 6:1 or less,
then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company
may be 0.5 greater than such ratio immediately preceding such designation; (B)
any Subsidiary which (a) has been acquired or capitalized out of or by Equity
Interests of the Company or Capital
68
<PAGE>
Stock Sales Proceeds therefrom, (b) has no Indebtedness other than Non-
Recourse Debt and (c) is designated as a Non-Restricted Subsidiary by the
Board of Directors or is merged, amalgamated or consolidated with or into, or
its assets or capital stock is to be transferred to, a Non-Restricted
Subsidiary; or (C) any Subsidiary of a Non-Restricted Subsidiary.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Old Notes" means the Applicable Notes, the 12 3/4% Notes, the 11 1/2% Notes
and the 10% Notes.
"Other Qualified Notes" means any outstanding senior indebtedness of the
Company issued pursuant to an indenture having a provision substantially
similar to the Asset Sale Offer provision contained in the Indenture
(including, without limitation, the 12 3/4% Notes, the 11 1/2% Notes and the
10% Notes).
"Permitted Acquired Debt" means, with respect to any Acquired Person
(including, for this purpose, any Non-Restricted Subsidiary at the time such
Non-Restricted Subsidiary becomes a Restricted Subsidiary), Acquired Debt of
such Acquired Person and its Subsidiaries in an amount (determined on a
consolidated basis) not exceeding the sum of (x) amount of the gross book
value of property, plant and equipment of the Acquired Person and its
Subsidiaries as set forth on the most recent consolidated balance sheet of the
Acquired Person (which may be unaudited) prior to the date it becomes an
Acquired Person and (y) the aggregate amount of any Cash Equivalents held by
such Acquired Person at the time it becomes an Acquired Person.
"Permitted Currency" means the lawful currency of the United States or a
European Union member.
"Permitted Designee" means (i) a spouse or a child of a Permitted Holder,
(ii) trusts for the benefit of a Permitted Holder or a spouse or child of a
Permitted Holder, (iii) in the event of the death or incompetence of a
Permitted Holder, his estate, heirs, executor, administrator, committee or
other personal representative or (iv) any Person so long as a Permitted Holder
owns at least 50% of the voting power of all classes of the voting stock of
such Person.
"Permitted Holders" means George S. Blumenthal, J. Barclay Knapp and their
Permitted Designees.
"Permitted Investments" means (a) any Investments in the Company or in a
Cable Controlled Property or in a Qualified Subsidiary (including, without
limitation, (i) Guarantees of Indebtedness of the Company, a Cable Controlled
Subsidiary or a Qualified Subsidiary, (ii) Liens securing such Indebtedness or
Guarantees or (iii) the payment of any balance deferred and unpaid of the
purchase price of any Qualified Subsidiary; (b) any Investments in Cash
Equivalents; (c) Investments by the Company in Indebtedness of a counter-party
to an Exchange Rate Contract for hedging a Permitted Currency exchange risk
that are made, for purposes other than speculation, in connection with such
contract to hedge not more than the aggregate principal amount of the
Indebtedness being hedged (or, in the case of Indebtedness issued with
original issue discount, based on the amounts payable after the amortization
of such discount); (d) Investments by the Company or any Subsidiary of the
Company in a Person, if as a result of such Investment (i) such Person becomes
a Cable Controlled Subsidiary or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of
the Company; and (e) any issuance, transfer or other conveyance of Equity
Interests in the Company (or any Capital Stock Sales Proceeds therefrom) to a
Subsidiary of the Company.
"Permitted Liens" means (a) Liens in favor of the Company; (b) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company; provided, that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not secure any property or assets of the Company or any
of its Subsidiaries other than the property or assets subject to the Liens
prior to such merger or consolidation; (c) liens imposed by law, such as
carriers', warehousemen's and mechanics' liens and other similar liens arising
in the ordinary course of business which secure payment of obligations not
more than 60 days past due or are being contested in good faith and by
69
<PAGE>
appropriate proceedings; (d) Liens existing on the Issuance Date; (e) Liens
for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded; provided, that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor and (f) easements, rights of way,
restrictions and other similar easements, licenses, restrictions on the use of
properties or minor imperfections of title that, in the aggregate, are not
material in amount, and do not in any case materially detract from the
properties subject thereto or interfere with the ordinary conduct of the
business of the Company or its Restricted Subsidiaries.
"Permitted Non-Controlled Assets" means Equity Interests in any Person
primarily engaged, directly or indirectly, in one or more Cable Businesses if
such Equity Interests (x) were acquired by the Company or any of its
Restricted Subsidiaries in connection with any Asset Sale or any Investment
otherwise permitted under the terms of the Indenture and (y) to the extent
that, after giving pro forma effect to the acquisition thereof by the Company
or any of its Restricted Subsidiaries, Adjusted Total Controlled Assets is
greater than 80% of Adjusted Total Assets based on the most recent
consolidated balance sheet of the Company.
"Pro Forma EBITDA" means for any Person, for any period, the EBITDA of such
Person as determined on a consolidated basis for such Person and its
Subsidiaries in accordance with GAAP after giving effect to the following: (i)
if, during or after such period, such Person or any of its Subsidiaries shall
have made any Asset Sale, Pro Forma EBITDA of such Person and its Subsidiaries
for such period shall be reduced by an amount equal to the Pro Forma EBITDA
(if positive) directly attributable to the assets which are the subject of
such Asset Sale for the period or increased by an amount equal to the Pro
Forma EBITDA (if negative) directly attributable thereto for such period and
(ii) if, during or after such period, such Person or any of its Subsidiaries
completes an acquisition of any Person or business which immediately after
such acquisition is a Subsidiary of such Person or whose assets are held
directly by such Person or a Subsidiary of such Person, Pro Forma EBITDA shall
be computed so as to give pro forma effect to the acquisition of such Person
or business (without giving effect to clause (iii) of the definition of
Consolidated Net Income); and provided further that, with respect to the
Company, all of the foregoing references to "Subsidiary" or "Subsidiaries"
shall be deemed to refer only to a "Restricted Subsidiary" or "Restricted
Subsidiaries" of the Company.
"Qualified Subsidiary" means a Wholly Owned Subsidiary, or an entity that
will become a Wholly Owned Subsidiary after giving effect to the transaction
being considered, that at the time of and after giving effect to the
consummation of the transaction under consideration, (i) is a Cable Business
or holds only Cable Assets, (ii) has no Indebtedness (other than Indebtedness
being incurred to consummate such transaction) and (iii) has no encumbrances
or restrictions (other than such encumbrances or restrictions imposed or
permitted by the Indentures, the indentures governing the Old Notes or any
other instrument governing unsecured indebtedness of the Company which is pari
passu with the Notes) on its ability to pay dividends or make any other
distributions to the Company or any of its Subsidiaries.
"Rating Agencies" means (i) S&P, (ii) Moody's and (iii) if S&P or Moody's or
both shall not make a rating of the Notes publicly available, a nationally
recognized securities rating agency or agencies, as the case may be, selected
by the Company, which shall be substituted for S&P or Moody's or both, as the
case may be.
"Rating Category" means (i) with respect to S&P, any of the following
categories: BB, B, CCC, CC, C and D (or equivalent successor categories), (ii)
with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C
and D (or equivalent successor categories) and (iii) the equivalent of any
such category of S&P or Moody's used by another Rating Agency. In determining
whether the rating of the Notes has decreased by one or more gradations,
gradations within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's;
or the equivalent gradations for another Rating Agency) shall be taken into
account (e.g., with respect to S&P, a decline in a rating from BB to BB-, as
well as from BB- to B+, will constitute a decrease of one gradation).
"Rating Date" means that date which is 90 days prior to the earlier of (x) a
Change of Control and (y) public notice of the occurrence of a Change of
Control or of the intention by the Company or any Permitted Holder to effect a
Change of Control.
70
<PAGE>
"Ratings Decline" means the occurrence of any of the following events on, or
within six months after, the date of public notice of the occurrence of a
Change of Control or of the intention of the Company or any Person to effect a
Change of Control (which period shall be extended so long as the rating of any
of the Company's debt securities is under publicly announced consideration for
possible downgrade by any of the Rating Agencies): (a) in the event that any
of the Company's debt securities are rated by both of the Rating Agencies on
the Rating Date as Investment Grade, the rating of such securities by either
of the Rating Agencies shall be below Investment Grade, (b) in the event that
any of the Company's debt securities are rated by either, but not both, of the
Rating Agencies on the Rating Date as Investment Grade, the rating of such
securities by both of the Rating Agencies shall be below Investment Grade, or
(c) in the event any of the Company's debt securities are rated below
Investment Grade by both of the Rating Agencies on the Rating Date, the rating
of such securities by either Rating Agency shall be decreased by one or more
gradations (including gradations within Rating Categories as well as between
Rating Categories).
"Redeemable Dividend" means, for any dividend with regard to Disqualified
Stock, the quotient of the dividend divided by the difference between one and
the maximum statutory federal income tax rate (expressed as a decimal number
between 1 and 0) then applicable to the issuer of such Disqualified Stock.
"Replacement Assets" means (w) Cable Assets, (x) Equity Interests of any
Person engaged, directly or indirectly, primarily in a Cable Business, which
Person is or will become on the date of acquisition thereof a Restricted
Subsidiary as a result of the Company's acquiring such Equity Interests, (y)
Permitted Non-Controlled Assets or (z) any combination of the foregoing.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the Company which is not a
Non-Restricted Subsidiary.
"Restricted Subsidiary Preferred Stock Dividend" means, for any dividend
with regard to preferred stock of a Restricted Subsidiary, the quotient of the
dividend divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such preferred stock.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Subordinated Debentures" means the debentures exchangeable by the Company
for the Preferred Stock in accordance with the Certificate of Designation
therefor.
"Subsidiary" means any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all of
the Capital Stock of which (except directors' qualifying shares) is at the
time owned directly or indirectly by the Company.
71
<PAGE>
REGISTRATION RIGHTS
The following summary of the registration rights provided in the
Registration Rights Agreements and the Old Notes does not purport to be
complete. It is qualified in its entirety by reference to the terms of the
registration rights set forth in the Registration Rights Agreements and the
Old Notes.
Holders of New Notes are not generally entitled to any registration rights
with respect to such New Notes. Pursuant to the Registration Rights
Agreements, holders of Old Notes are entitled to certain registration rights.
Pursuant to the Registration Rights Agreements, the Company agreed to file
with the Commission a registration statement, including a prospectus, (the
"Exchange Offer Registration Statement") on the appropriate form under the
Securities Act with respect to an offer to exchange each class of the Old
Notes for New Notes registered under the Securities Act with terms
substantially identical to those of each class of the Old Notes. Upon the
effectiveness of the Exchange Offer Registration Statement, the Company will
offer to the holders of Transfer Restricted Securities pursuant to the
Exchange Offer, who are able to make certain representations with respect to
the applicable class of Old Notes, the opportunity to exchange their Transfer
Restricted Securities for New Notes of the applicable class. If (i) with
respect to any class of the Old Notes the Company is not required to file the
Exchange Offer Registration Statement or permitted to consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any holder of Transfer Restricted Notes notifies the
Company within the specified time period that (A) it is prohibited by law or
Commission policy from participating in the Exchange Offer or (B) that it may
not resell the Exchange Securities acquired by it in the Exchange Offer to the
public without delivering a prospectus and the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales or (C) that it is a broker-dealer and owns Old Notes acquired directly
from the Company or an affiliate of the Company, the Company will file with
the Commission a shelf registration statement (a "Shelf Registration
Statement") to cover resales of the applicable Old Notes by the holders
thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement. The Company
will use its best efforts to cause the applicable Registration Statement to be
declared effective as promptly as possible by the Commission. For purposes of
the foregoing, "Transfer Restricted Notes" means each Old Note until (i) the
date on which such Note has been exchanged by a person other than a broker-
dealer for a New Note in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of an Old Note for a New Note, the date on
which such New Note is sold to a purchaser who receives from such broker-
dealer on or prior to the date of such sale a copy of the prospectus contained
in the Exchange Offer Registration Statement, (iii) the date on which such Old
Note has been effectively registered under the Securities Act and disposed of
in accordance with the Shelf Registration Statement, (iv) the date on which
such Old Note is distributed to the public pursuant to Rule 144 under the Act
(or any similar provision then in effect) or is saleable pursuant to Rule
144(k) under the Act or (v) the date upon which such Old Note ceases to be
outstanding.
The Registration Rights Agreements provide that (i) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to June
12, 1998, (ii) the Company will use its best efforts to have the Exchange
Offer Registration Statement declared effective by the Commission on or prior
to December 9, 1998, (iii) unless the Exchange Offer would not be permitted by
applicable law or Commission policy, the Company will commence the Exchange
Offer and use its best efforts to issue on or prior to January 18, 1999,
Exchange Notes in exchange for all Notes tendered prior thereto in the
Exchange Offer and (iv) if obligated to file the Shelf Registration Statement,
the Company will use its best efforts to file the Shelf Registration Statement
with the Commission as promptly as practicable after such filing obligation
arises and to cause the Shelf Registration to be declared effective by the
Commission on or prior to January 18, 1999. If, with respect to any class of
the Notes (a) the Company fails to file the Exchange Offer Registration
Statement on or before the date specified for such filing, (b) the Exchange
Offer Registration Statement is not declared effective on or prior to December
9, 1998 or (c) the Company fails to consummate the Exchange Offer, or a Shelf
Registration Statement is not declared effective, within the specified time
frames (each such event referred to in clauses (a) through (c) above a
"Registration Default"), then the Company will pay special interest pursuant
to provisions of the Old Note to each holder of the applicable Old Notes.
Special interest will accrue from and including (i) June 13,
72
<PAGE>
1998 in the case of clause (i) above, (ii) December 10, 1998 in the case of
clause (ii) above, (iii) January 19, 1999 in the case of clause (iii) above or
(iv) January 19, 1999 in the case of clause (iv) above (each such period
referred to in clauses (i)-(iv) above an "Accrual Period"), at a rate per
annum equal to 0.50% of the principal amount of the Old Sterling Senior Notes
or the Accreted Value of the Old Sterling Deferred Coupon Notes or the Old USD
Deferred Coupon Notes, as applicable (determined daily). The amount of the
special interest will increase by an additional 0.50% of the principal amount
of the Old Sterling Senior Notes or the Accreted Value of the Old Sterling
Deferred Coupon Notes or the Old USD Deferred Coupon Notes, as applicable with
respect to each subsequent applicable Accrual Period until all Registration
Defaults have been cured, up to a maximum amount of special interest of 1.50%
per annum of the principal amount of the Old Sterling Senior Notes or the
Accreted Value of the Old Sterling Deferred Coupon Notes or the Old USD
Deferred Coupon Notes, as applicable (determined daily). All accrued special
interest will be paid by the Company on each Interest Payment Date to the
applicable Global Note holder by wire transfer of immediately available funds
or by federal funds check and to holders of Certificated Securities by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the
cure of all Registration Defaults, the accrual of special interest will cease.
In the event that a Shelf Registration Statement is declared effective
pursuant to the terms of a Registration Rights Agreement, if the Company fails
to keep such Registration Statement continuously effective for the period
required by the Registration Rights Agreement, then from such time as the
Shelf Registration Statement is no longer effective until the earlier of (i)
the date that the Shelf Registration Statement is again deemed effective, (ii)
March 13, 2000 or (iii) the date as of which all of the Transfer Restricted
Notes are sold pursuant to the Shelf Registration Statement, special interest
pursuant to provisions of the Notes shall accrue at a rate per annum equal to
0.50% of the principal amount of the Old Sterling Senior Notes or the Accreted
Value of the Old Sterling Deferred Coupon Notes or the Old USD Deferred Coupon
Notes, as applicable (determined daily) (1.00% thereof if the Shelf
Registration Statement is no longer effective for 30 days or more) and shall
be payable in cash semiannually in arrears on each April 1 and October 1 of
each year, to the holders of record on the immediately preceding March 15 and
September 15, respectively. The Company will be permitted to suspend use of
the prospectus that is part of any Shelf Registration Statement during certain
periods of time and in certain circumstances relating to pending corporate
developments and public filings with Commission and similar events.
Special interest on the Old Notes, if any, will be computed on the basis of
a 360-day year comprised of twelve 30-day months.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
special interest pursuant to provisions of the Old Notes, as set forth above.
73
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summarizes the principal terms of certain indebtedness of the
Company (other than the Notes). It does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the
provisions of the indenture or agreement governing the relevant indebtedness,
copies of which are filed as exhibits to the Registration Statement of which
this Prospectus is a part.
<TABLE>
<CAPTION>
7% 11 1/2% 12 3/4% 10 7/8%
CONVERTIBLE SERIES B SENIOR SERIES A SENIOR SENIOR DEFERRED 10% REDEEMABLE
SUBORDINATED DEFERRED COUPON DEFERRED COUPON COUPON SERIES B PREFERRED
NOTES NOTES NOTES NOTES SENIOR NOTES STOCK
<S> <C> <C> <C> <C> <C> <C>
Net Proceeds($)
(in 000's)...... 267,437 582,000 145,125 119,797 389,000 96,625
Issue Date....... June 12, 1996 January 30, 1996 April 20, 1995 October 7, 1993 February 14, 1997 February 14, 1997
Issue Price(1)... 100% 57.155% 53.995% 58.873% 100% 100%
Aggregate
Principal Amount
at Maturity($)
(in 000's)...... 275,000 1,050,000 277,803 212,000 400,000 100,000
Maturity Date.... June 15, 2008 February 1, 2006 April 15, 2005 October 15, 2003 February 15, 2007 February 15, 2009
Yield or Interest
Rate(2)......... 7% 11 1/2% 12 3/4% 10 7/8% 10% 13%
Interest or June 15 and February 1 and April 15 and April 15 and February 15 and May 15, August 15,
Dividend Payment December 15 August 1 October 15 October 15 August 15 November 15 and
Dates........... from 12-15-96 from 8-1-01 from 10-15-00 from 4-15-99 from 8-15-97 February 15
from 5-15-97(3)
Earliest Optional
Redemption
Date(4)......... June 15, 1999 February 1, 2001 April 15, 2000 October 15, 1998 February 15, 2002 February 15, 2002
Redemption 104.9 (1999) to 105.75 (2001) to 103.64 (2000) to 103.107 (1998) to 105 (2002) to 106.5 (2002) to
Price(%)(5)..... 100 (2006) 100 (2003) 100 (2002) 100 (2000) 100 (2005) 100 (2005)
Conversion
Price($)(6)..... 37.875 N/A N/A N/A N/A N/A
Senior/Subordinated.. Subordinated Senior Senior Senior Senior N/A
</TABLE>
- ---------------------
(1) Percent of aggregate principal amount at maturity (or aggregate liquidation
preference in the case of the Redeemable Preferred Stock).
(2) Percent per annum.
(3) Dividend payments on the Redeemable Preferred Stock are payable in cash or
additional shares of Redeemable Preferred Stock, at the Company's option.
From May 15, 2004, dividend payments are payable in cash.
(4) This is the first date when redeemable at the Company's option. The
Redeemable Preferred Stock is mandatorily redeemable for cash on February
15, 2009.
(5) Expressed as a percentage of principal amount or liquidation preference,
as applicable, plus, in each case, accrued and unpaid interest or
dividends thereon to the applicable redemption date.
(6) This is the conversion price per share of the Company's common stock,
adjusted for the four-for-three stock split in August 1995 and subject to
further adjustments in certain events.
THE 10 7/8% NOTES
In October 1993, the Company issued its 10 7/8% Notes at a discount to their
aggregate principal amount to generate gross proceeds to the Company of
approximately $125 million. The 10 7/8% Notes accrete at a rate of 10 7/8%
compounded semi-annually to an aggregate principal amount of $212 million by
October 15, 1998. Interest does not accrue on the 10 7/8% Notes prior to
October 15, 1998. Thereafter, the 10 7/8% Notes accrue interest in cash at the
rate of 10 7/8% per annum on the principal amount payable semiannually on
October 15 and April 15, commencing on April 15, 1999, to holders of record on
the immediately preceding October 1 and April 1. The 10 7/8% Notes mature on
October 15, 2003. Except as described below, the 10 7/8% Notes will not be
redeemable prior to October 15, 1998. Thereafter, the 10 7/8% Notes are
redeemable, in whole or in part, at the option of the Company, at the
redemption prices set forth in the indenture pursuant to which the 10 7/8%
Notes were issued (the "10 7/8% Notes Indenture"), plus accrued and unpaid
interest to the date of redemption. In the event of a Change in Control (as
defined in the 10 7/8% Notes Indenture), each holder of 10 7/8% Notes has the
right to require the Company to repurchase its 10 7/8% Notes at a purchase
price equal to 101% of the Accreted Value thereof on any purchase date prior
to October 15, 1998, or 101% of the principal amount thereof plus accrued and
unpaid interest to any purchase date on or after October 15, 1998. Subject to
certain conditions, the Company will be obligated to offer to purchase the 10
7/8% Notes with the Excess Proceeds of certain Asset Sales
74
<PAGE>
at a redemption price of 100% of the accreted value or, as the case may be,
principal amount thereof plus accrued and unpaid interest. The 10 7/8% Note
Indenture contains certain restrictions with respect to, among other things,
the payment of dividends, the repurchase of stock and the making of certain
other Restricted Payments, the incurrence of additional Indebtedness, the
creation of certain Liens, certain Asset Sales, transactions with subsidiaries
and other Affiliates and mergers and consolidations.
In January 1996, the Company received the necessary consents of registered
holders of the 10 7/8% Notes to amend the 10 7/8% Notes Indenture so as to
allow the Company and its subsidiaries to take certain actions that were
previously prohibited under the 10 7/8% Notes Indenture, particularly
regarding the financing of the Company's and its subsidiaries' business and
future acquisitions. In addition, the amendment eliminated some, but not all,
of certain differences between the covenants in the 10 7/8% Notes Indenture
and the existing 12 3/4% Notes Indenture. On January 23, 1996, the Company and
Chemical Bank, now known as The Chase Manhattan Bank, as Trustee, executed a
first supplemental indenture to effect such amendment.
The 10 7/8% Notes are senior unsecured obligations of the Company ranking
pari passu in right of payment of principal and interest with all other
existing and future senior unsecured obligations of the Company and rank
senior to all other existing and future subordinated debt of the Company,
including, without limitation, the Convertible Notes.
THE 12 3/4% NOTES
In April 1995, concurrently with the offering of the 7 1/4% Convertible
Notes summarized below, the Company issued $277,803,500 aggregate principal
amount at maturity of its 12 3/4% Senior Deferred Coupon Notes Due 2005 (the
"Old 12 3/4% Notes") at a discount to their aggregate principal amount to
generate gross proceeds to the Company of approximately $150,000,000. The Old
12 3/4% Notes were issued and sold in a transaction exempt from the
registration requirement of the Securities Act pursuant to Rule 144A under the
Securities Act or in transactions complying with Regulation S under the
Securities Act. On August 18, 1995 the Company issued $277,803,500 aggregate
principal amount at maturity of the 12 3/4% Series A Senior Deferred Coupon
Notes Due 2005 (the "12 3/4% Notes") in exchange for the Old 12 3/4% Notes
pursuant to the indenture relating thereto (the "12 3/4% Notes Indenture").
The terms of the 12 3/4% Notes are identical in all material respects to the
Old 12 3/4% Notes except for certain transfer restrictions and registration
rights applicable to the Old 12 3/4% Notes. The Old 12 3/4% Notes were
cancelled on August 18, 1995 on consummation of the exchange offer which was
made pursuant to the Company's Prospectus dated July 18, 1995, forming part of
the Registration Statement on Form S-4 (File No. 33-92794) filed with the
Commission on May 26, 1995.
The 12 3/4% Notes accrete at a rate of 12 3/4% computed on a semiannual bond
equivalent basis to an aggregate principal amount at maturity of $277,803,500.
Cash interest on the 12 3/4% Notes does not accrue until prior to April 15,
2000. Thereafter, the 12 3/4% Notes accrue interest in cash at the rate of 12
3/4% per annum on the principal amount payable semiannually on April 15 and
October 15 of each year, commencing October 15, 2000 to holders of record on
the immediately preceding April 1, and October 1. The 12 3/4% Notes mature on
April 15, 2005. The 12 3/4% Notes are redeemable, at the option of the Company
at any time, in whole or in part, on or after April 15, 2000 at the redemption
prices set forth in the 12 3/4% Notes Indenture, plus any unpaid interest, if
any, to the date of redemption. The 12 3/4% Notes may also be redeemed at the
option of the Company in whole but not in part in certain circumstances where
Additional Amounts (as defined in the 12 3/4% Notes Indenture) are payable
under the 12 3/4% Notes. In such circumstances the 12 3/4% Notes to be
repurchased must be repurchased at 100% of Accreted Value, or, as the case may
be, principal amount thereof. Upon a Change of Control (as defined in the 12
3/4% Notes Indenture), holders of the 12 3/4% Notes have the right to require
the Company to repurchase all or any part of the 12 3/4% Notes at a repurchase
price equal to 101% of the Accreted Value thereof plus accrued and unpaid
interest, if any. Subject to certain conditions, the Company is obligated to
offer to purchase the 12 3/4% Notes and other Qualified Senior Notes (as
defined in the 12 3/4% Notes Indenture) with the Excess Proceeds of certain
Asset Sales at a redemption price of 100% of the Accreted Value or, as the
case may be, principal amount thereof plus accrued and unpaid interest. The 12
3/4% Notes Indenture contains
75
<PAGE>
certain restrictions with respect to, among other things, the payment of
dividends, the repurchase of stock and the making of certain other Restricted
Payments, the incurrence of additional Indebtedness, the creation of certain
Liens, certain Asset Sales, transactions with Subsidiaries and other
Affiliates and mergers and consolidations.
The 12 3/4% Notes are senior unsecured obligations of the Company ranking
pari passu in right of payment of principal and interest with all other
existing and future senior unsecured obligations of the Company and rank
senior to all other existing and future subordinated debts of the Company,
including, without limitation, the Convertible Notes and the 7 1/4%
Convertible Notes.
The Company has recently obtained the necessary consents of the registered
holders of the 12 3/4% Notes to certain proposed amendments to the 12 3/4%
Notes Indenture. On January 22, 1996, the Company and Chemical Bank, now known
as The Chase Manhattan Bank, as Trustee, executed a first supplemental
indenture to effect those amendments. In general, the amendments modify the 12
3/4% Notes Indenture by amending the covenant entitled "Limitations on
Dividend and Other Payment Restrictions Affecting Subsidiaries" and other
provisions to facilitate the arrangement of the Potential Credit Facilities
and other financings and make certain conforming and other changes to the 12
3/4% Notes Indenture.
THE 11 1/2% NOTES
In January 1996, the Company issued $1,050,000,000 aggregate principal
amount of maturity of its 11 1/2% Series A Senior Deferred Coupon Notes Due
2006 (the "Old 11 1/2% Notes") at a discount to their aggregate principal
amount to generate gross proceeds to the Company of approximately
$600,127,500. The Old 11 1/2% Notes were issued and sold in a transaction
exempt from the registration requirement of the Securities Act pursuant to
Rule 144A under the Securities Act. On May 23, 1996, the Company issued
$1,050,000,000 aggregate principal amount at maturity of the 11 1/2% Series B
Senior Deferred Coupon Notes Due 2006 (the "11 1/2% Notes") in exchange for
the Old 11 1/2% Notes pursuant to the Indenture relating thereto (the "11 1/2%
Notes Indenture"). The terms of the 11 1/2% Notes are identical in all
material respects to the Old 11 1/2% Notes except for certain transfer
restrictions and registration rights applicable to the Old 11 1/2% Notes. The
Old 11 1/2% Notes tendered for exchange were cancelled on May 23, 1996 on
consummation of the exchange offer made pursuant to the Company's Prospectus
dated April 22, 1996, forming part of the Company's Registration Statement on
Form S-4 (File No. 333-1010) filed with the Commission on April 16, 1996.
The 11 1/2% Notes accrete at a rate of 11 1/2% computed on a semiannual bond
equivalent basis to an aggregate principal amount at maturity of
$1,050,000,000. Cash interest on the 11 1/2% Notes does not accrue until
February 1, 2001. Thereafter, the 11 1/2% Notes accrue interest in cash at the
rate of 11 1/2% per annum on the principal amount payable semiannually on
February 1 and August 1 of each year, commencing August 1, 2001, to holders of
record on the immediately preceding January 15, and July 15. The 11 1/2% Notes
mature on February 1, 2006. The 11 1/2% Notes are redeemable, at the option of
the Company at any time, in whole or in part, on or after February 1, 2001 at
the redemption prices set forth in the 11 1/2% Notes Indenture plus any
accrued unpaid interest to the date of redemption. The 11 1/2% Notes may also
be redeemed at the option of the Company in whole but not in certain
circumstances where "Additional Amounts" (as defined in the 11 1/2% Notes
Indenture) are payable under the 11 1/2% Notes. In such circumstances, the 11
1/2% Notes to be repurchased must be repurchased at 100% of accreted value or,
as the case may be, principal amount thereof plus accrued and unpaid interest.
Upon a Change of Control (as defined in the 11 1/2% Notes Indenture), holders
of the 11 1/2% Notes have the right to require the Company to repurchase all
or any part of the 11 1/2% Notes at a repurchase price equal to 101% of the
accreted value or, as the case may be, principal amount thereof plus accrued
and unpaid interest, if any. Subject to certain conditions, the Company is
obligated to offer to purchase the 11 1/2% Notes and other Qualified Senior
Notes (as defined in the 11 1/2% Notes Indenture) with the Excess Proceeds of
certain Asset Sales at a redemption price of 100% of the accreted value or, as
the case may be, principal amount thereof plus accrued and unpaid interest, if
any. The 11 1/2% Notes Indenture contains certain restrictions with respect
to, among other things, the payment of dividends, the repurchase of stock and
the making of certain other Restricted Payments, the incurrence of additional
Indebtedness, the creation of certain Liens, certain sales of assets,
transactions with Subsidiaries and other Affiliates and mergers and
consolidations.
76
<PAGE>
The 11 1/2% Notes are senior unsecured obligations of the Company ranking
pari passu in right of payment of principal and interest with all other
existing and future senior unsecured obligations of the Company and rank
senior to all other existing and future subordinated debt of the Company,
including, without limitation, the Convertible Notes and the 7 1/4%
Convertible Notes.
THE 10% NOTES
In February 1997, the Company issued $400,000,000 aggregate principal amount
of its 10% Series A Senior Notes Due 2007 (the "Old 10% Notes"). The Old 10%
Notes were issued and sold in a transaction exempt from the registration
requirement of the Securities Act pursuant to Rule 144A under the Securities
Act. On June 27, 1997 the Company issued $400,000,000 aggregate principal
amount at maturity of the 10% Series B Senior Notes Due 2007 (the "10% Notes")
in exchange for the Old 10% Notes pursuant to the indenture relating thereto
(the "10% Notes Indenture"). The terms of the 10% Notes are identical in all
material respects to the Old 10% Notes except for certain transfer
restrictions and registration rights applicable to the Old 10% Notes. The Old
10% Notes tendered for exchange were cancelled on June 27, 1997 on
consummation of the exchange offer made pursuant to the Company's Prospectus
dated May 27, 1997, forming part of the Company's Registration Statement on
Form S-4 (File No. 333-25577) filed with the Commission on April 21, 1997.
The 10% Notes accrue interest in cash at the rate of 10% per annum on the
principal amount payable semiannually on February 15 and August 15 of each
year, to holders of record on the immediately preceding February 1, and August
1. The 10% Notes mature on February 15, 2007. The 10% Notes are redeemable, at
the option of the Company at any time, in whole or in part, on or after
February 15, 2002 are redemption prices set forth in the 10% Notes Indenture,
plus any accrued unpaid interest to the date of redemption. The 10% Notes may
also be redeemed at the option of the Company in whole but not in certain
circumstances where "Additional Amounts" (as defined in the 10% Notes
Indenture) are payable under the 10% Notes. In such circumstances, the 10%
Notes to be repurchased must be repurchased at 100% of the principal amount
thereof plus accrued and unpaid interest. Upon a Change of Control (as defined
in the 10% Notes Indenture), holders of the 10% Notes have the right to
require the Company to repurchase all or any part of the 10% Notes at a
repurchase price equal to 101% of the principal amount thereof plus accrued
and unpaid interest, if any. Subject to certain conditions, the Company is
obligated to offer to purchase the 10% Notes and other Qualified Senior Notes
(as defined in the 10% Notes Indenture) with the Excess Proceeds of certain
Asset Sales at a redemption price of 100% of the principal amount thereof plus
accrued and unpaid interest, if any. The 10% Notes Indenture contains certain
restrictions with respect to, among other things, the payment of dividends,
the repurchase of stock and the making of certain other Restricted Payments,
the incurrence of additional Indebtedness, the creation of certain Liens,
certain sales of assets, transactions with Subsidiaries and other Affiliates
and mergers and consolidations.
The 10% Notes are senior unsecured obligations of the Company ranking pari
passu in right of payment of principal and interest with all other existing
and future senior unsecured obligations of the Company and rank senior to all
other existing and future subordinated debt of the Company.
THE NEW CREDIT FACILITY
In August 1997, NTL (UK) Group, Inc., a wholly-owned subsidiary of the
Company, which is the holding company for the United Kingdom operations and
the parent company of NTLIH, and NTLIH entered into an agreement with The
Chase Manhattan Bank pursuant to which Chase has agreed to fully underwrite an
(Pounds)875 million eight-year term loan facility with an initial four-year
revolving period (which amount is likely to be reduced as a result of the
Offering). The New Credit Facility will be used to finance capital
expenditures and working capital for the Company's United Kingdom operations,
including its local broadband, national telecommunications and national
digital television networks. A portion of the facility ((Pounds)75 million) is
conditional upon the execution of contracts to provide digital television
transmission services to certain third parties. Chase has provided a portion
of the New Credit Facility in the form of a (Pounds)350 million facility to
the Company on substantially the same terms as to restrictions, covenants,
guarantees and security as the New Credit Facility.
77
<PAGE>
Prior to the Offering of the Old Notes, Chase had a commitment to increase the
amounts available to be borrowed thereunder to (Pounds)875 million. Upon
completion of the offering of the Old Notes, Chase's commitment under the New
Credit Facility was reduced to (Pounds)555 million. If a portion of proceeds
of the offering of the Old Notes is used for the repayment of existing
indebtedness in certain circumstances or, if such proceeds are not so used by
April 14, 1999, Chase's commitment will be further reduced to no less than
(Pounds)480 million or such greater amount as is necessary to ensure that the
Company's UK operations remain fully funded by reference to an agreed business
plan. At March 20, 1998, the Company had outstanding (Pounds)10 million of the
(Pounds)350 million currently available under the New Credit Facility. The
final maturity of the principal amount outstanding under the (Pounds)350
million facility is December 31, 2005. Interest will be payable either
monthly, quarterly or semi-annually, at the option of NTLIH, at LIBOR plus, at
a maximum, 2.25% per annum. The commitment fee is .375% per annum on the
unutilized portion of the (Pounds)350 million facility and is payable
quarterly in arrears. The facility is secured by first fixed and floating
charges over all present and future assets and undertakings of the United
Kingdom group. The facility contains customary financial covenants, and
certain restrictions relating to, among other things: (i) incurrence of
additional indebtedness or guarantees, (ii) investments, acquisitions and
mergers and (iii) dividend and other payment restrictions. In the absence of a
default, the New Credit Facility generally permits payments to the Company to
pay the interest and principal on existing indebtedness of the Company.
In connection with the New Credit Facility, NTL (UK) Group, Inc. entered
into a European Currency Option with a bank in which NTL (UK) Group, Inc. may
purchase U.S. dollars at a fixed rate of (Pounds)1 to $1.40. The option is
exercisable on specified dates commencing through June 2001 for specified
amounts of U.S. dollars. The dates and U.S. dollar amounts correspond to the
Company's interest payment dates and amounts for its U.S. dollar denominated
debt and anticipated amounts of parent company expenses.
THE 7% CONVERTIBLE NOTES
In June 1996, the Company issued and sold an aggregate principal amount of
$275,000,000 of its 7% Convertible Subordinated Notes Due 2008 in transactions
exempt from, or not subject to, the registration requirements of the
Securities Act. Cash interest on the 7% Convertible Notes is payable
semiannually on June 15 and December 15 of each year, commencing December 16,
1996. The 7% Convertible Notes mature on June 15, 2008. The 7% Convertible
Notes are convertible at the option of the holder thereof at any time prior to
maturity, unless previously redeemed, into shares of Common Stock of the
Company, at a conversion price of $37.875 per share subject to further
adjustment in certain events. The 7% Convertible Notes are redeemable, in
whole or in part, at the option of the Company, at any time on or after June
15, 1999, at the redemption prices set forth in the indenture pursuant to
which the 7% Convertible Notes were issued (the "7% Convertible Notes
Indenture"). Upon a Change of Control (as defined in the 7% Convertible Notes
Indenture) holders of the 7% Convertible Notes have the right to require the
Company to purchase all or any part of the 7% Convertible Notes at a purchase
price equal to 101% of the principal amount thereof and any accrued and unpaid
interest to the date of purchase. The 7% Convertible Notes Indenture contains
certain restrictions with respect to, among other things, certain Asset Sales,
payment of Additional Amounts and mergers and consolidations.
The 7% Convertible Notes are unsecured obligations of the Company,
subordinated in right of payment to all exiting and future Senior Debt of the
Company (as defined in the 7% Convertible Notes Indenture) including, without
limitations, the 10 7/8% Notes, the 12 3/4% Notes and the 11 1/2% Notes.
On September 13, 1996, the Commission declared effective the Company's shelf
registration statement relating to the resale of the 7% Convertible Notes and
the Common Stock issuable upon conversion thereof by the holders thereof.
78
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material U.S. federal income tax
consequences of an exchange of Old Notes for the New Notes and the ownership
of the New Notes. It deals only with Notes held as capital assets by initial
holders of Old Notes, and does not deal with special situations, such as those
of dealers in securities, financial institutions, insurance companies and
holders whose "functional currency" is not the U.S. dollar, or special rules
with respect to straddle or "hedging" transactions. The discussion below is
based upon the Internal Revenue Code of 1986, as amended (the "Code") and
regulations, rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified (including
retroactively) so as to result in federal income tax consequences different
from those discussed below. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE TAX CONSEQUENCES THAT MAY BE SPECIFIC TO THEM OF THE EXCHANGE OF
OLD NOTES FOR NEW NOTES AND THE OWNERSHIP OF THE NEW NOTES, AS WELL AS ANY TAX
CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR FOREIGN LAWS.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized under the laws of the United States or any political
subdivision thereof or therein, (iii) an estate or trust described in Section
7701(a)(30) of the Code, or (iv) a person whose worldwide income or gain is
otherwise subject to U.S. federal income taxation on a net income basis (a
"U.S. Holder"). As used herein, the term "Non-U.S. Holder" means a holder of a
Note that is not a U.S. Holder.
EXCHANGE OF NOTES
There will be no federal income tax consequences to holders exchanging Old
Notes for New Notes pursuant to the Exchange Offer since the Exchange Offer
will be by operation of the original terms of the Old Notes, pursuant to a
unilateral act by the Company, and will not result in any material alteration
in the terms of the Old Notes. Each exchanging holder will have the same
adjusted tax basis and holding period in the New Notes as it had in the Old
Notes immediately before the exchange.
TAXATION OF NOTES--U.S. HOLDERS
Payments of Interest. Payments of Interest on Sterling Senior Notes, which
are not included in original issue discount, as discussed below, generally
will be taxable to a U.S. Holder as ordinary interest income at the time such
payments are accrued or received (in accordance with the U.S. Holder's method
of accounting for federal income tax purposes).
Original Issue Discount. Because the Old USD Deferred Coupon Notes and the
Old Sterling Deferred Coupon Notes (the "Old Discount Notes") were issued with
original issue discount ("OID"), the New Notes issued in exchange for the Old
Discount Notes ("New Discount Notes") will also bear OID that each U.S. Holder
of a New Discount Note generally will be required to include in income as it
accrues on a yield-to-maturity basis over the term of the New Discount Note in
advance of cash payments attributable to such income (regardless of whether
the holder is a cash or accrual basis taxpayer). The amount of OID with
respect to a New Discount Note will equal the excess of the stated redemption
price at maturity of such New Discount Note over its issue price. The stated
redemption price at maturity will include all payments required to be made on
the New Discount Note, whether denominated as principal or interest (other
than payments subject to remote or incidental contingencies). The issue price
of the New Discount Notes equals the issue price of the Old Discount Notes,
which was $617.24 per $1,000 principal amount at maturity in the case of the
Old USD Deferred Coupon Notes and (Pounds)586.20 per (Pounds)1,000 principal
amount at maturity in the case of the Old Sterling Deferred Coupon Notes.
A U.S. Holder of a debt instrument that bears OID is required to include in
gross income an amount equal to the sum of the daily portions of OID for each
day during the taxable year in which such holder holds the debt instrument.
The daily portions of OID are determined by allocating to each day in an
accrual period the pro rata
79
<PAGE>
portion of the OID that is allocable to the accrual period. The amount of OID
that is allocable to an accrual period with respect to New Discount Notes
generally will be equal to the product of the adjusted issue price of such
notes at the beginning of the accrual period (the issue price of the New
Discount Notes determined as described above, generally increased by all prior
accruals of OID with respect to the particular Old Discount Notes and New
Discount Notes and decreased by the amount of payments made on such New
Discount Notes) and the New Discount Notes' yield-to-maturity (the discount
rate, which, when applied to all payments under the particular New Discount
Notes and Old Discount Notes, results in a present value equal to the issue
price of such New Discount Notes). In the case of the final accrual period,
the allocable OID generally is the difference between the amount payable at
maturity and the adjusted issue price at the beginning of the accrual period.
All payments on a Discount Note generally will be viewed first as a payment of
previously accrued OID (to the extent thereof), with payments considered made
from the earliest accrual period, and then as a payment of principal.
The Company will furnish annually to the Internal Revenue Service (the
"IRS") and to U.S. Holders (other than with respect to certain exempt holders,
including, in particular, corporations) information with respect to the OID
accruing while the Discount Notes were held by the U.S. Holders.
Under certain circumstances described above, the Company will be required to
pay special interest on the Discount Notes if it fails to comply with certain
of its obligations under the Registration Rights Agreement. Although not free
from doubt, such additional amount should be taxable to a U.S. Holder as
ordinary income at the time it accrues or is received in accordance with such
holder's regular method of accounting. It is possible, however, that the IRS
may take a different position, in which case the timing and the amount of
income on the Discount Notes may be different.
Disposition of Notes. A U.S. Holder will generally recognize gain or loss
upon the sale, exchange, retirement or other disposition of New Notes equal to
the difference between the amount realized on the disposition (other than
amounts attributable to accrued but unpaid interest) and the U.S. Holder's
adjusted tax basis in the New Notes. A U.S. Holder's adjusted tax basis in a
New Note will generally be the cost of the Old Note, increased by any OID
previously included in income by such holder and decreased by any amount
received on the Note that is not treated as ordinary interest income. Such
gain or loss generally would be capital gain or loss (except to the extent of
any exchange gain or loss with respect to foreign currency, as discussed
below).
In the case of a U.S. Holder who is an individual, such capital gain will be
subject to tax at a maximum 28% rate if the holding period for the New Note
(which includes the holding period of the Old Note) is more than 12 months but
not more than 18 months at the time of the sale, exchange, retirement or other
disposition, and a maximum 20% rate if such holding period is more than 18
months at such time.
NOTES DENOMINATED IN POUNDS STERLING
The Sterling Senior Notes and the Sterling Deferred Coupon Notes (the
"Sterling Notes") are denominated in a currency unit other than the U.S.
dollar. The following is a summary of certain of the United States federal
income tax consequences to U.S. Holders of the ownership of the Sterling
Notes.
Payments of Interest in Foreign Currency--Cash Method. A U.S. Holder who
uses the cash method of accounting for federal income tax purposes and who
receives interest on a Sterling Note (other than attributable to OID that has
already been included in income) will be required to include in income the
U.S. dollar value of the foreign currency payment, determined on the date such
payment is received, regardless of whether the payment is in fact converted to
U.S. dollars at that time, and such U.S. dollar value will be the U.S.
Holder's tax basis in such foreign currency.
Payments of Interest in Foreign Currency--Accrual Method. A U.S. Holder who
uses the accrual method of accounting for federal income tax purposes, or who
is otherwise required to accrue interest prior to receipt, will be required to
include in income the U.S. dollar value of the amount of interest income
accrued and is
80
<PAGE>
otherwise required to be taken into account with respect to a Sterling Note
during an accrual period. The U.S. dollar value of such accrued income will be
determined by translating such income at the average rate of exchange for the
accrual period, or with respect to an accrual period that spans two taxable
years, at the average rate for the partial period within the taxable year. A
U.S. Holder may elect, however, to translate such accrued interest income
using the rate of exchange on the last day of the accrual period or, with
respect to an accrual period that spans two taxable years, using the rate of
exchange on the last day of the taxable year. If the last day of an accrual
period is within five business days of the receipt of the accrued interest, a
U.S. Holder may translate such interest using the rate of exchange on the date
of receipt. The above election will apply to other debt obligations held by
the U.S. Holder and may not be changed without the consent of the IRS. Whether
or not such election is made, a U.S. Holder may recognize exchange gain or
loss (which will be treated as ordinary income or loss, but not interest
income or expense) with respect to accrued interest income on the date such
income is received. The amount of ordinary income or loss recognized will
equal the difference, if any, between the U.S. dollar value of the foreign
currency payment received (determined on the date such payment is received) in
respect of such accrual period and the U.S. dollar value of interest income
that has accrued during such accrual period (as determined above).
Disposition of New Notes. As discussed above, upon the sale, exchange or
retirement of a New Note, a U.S. Holder will recognize taxable gain or loss
equal to the difference between the amount realized on the sale, exchange or
retirement and such holder's adjusted tax basis in the New Note. Such gain or
loss generally will be capital gain or loss (except to the extent of any
amounts attributable to accrued but unpaid interest) and the gain or loss will
be capital gain or loss subject to tax at a 28% maximum rate if the holder is
an individual whose holding period in such New Note (which includes such
holder's holding period in the Old Note) exceeds 12 months but does not exceed
18 months at the time of the sale, exchange, retirement or other disposition,
and will be subject to tax at a 20% maximum rate if the holder is an
individual whose holding period in such Note exceeds 18 months. To the extent
the amount realized represents accrued but unpaid interest, however, such
amounts must be taken into account as interest income, with exchange gain or
loss computed as described in "Payments of Interest in Foreign Currency"
above. If a U.S. Holder receives foreign currency on such a sale, exchange or
retirement, the amount realized will be based on the U.S. dollar value of the
foreign currency on the date of disposition (assuming the New Notes are not
publicly traded). A U.S. Holder's adjusted tax basis in a New Note will equal
the U.S. dollar cost of the Old Note (determined on the date of purchase) to
such holder, increased by the U.S. dollar value of the amounts of any OID
previously included in income by the holder and reduced by the U.S. dollar
value of any payments received by the holder (other than payments representing
ordinary interest income). In the case of an adjustment resulting from the
accrual of OID, such adjustment will be made at the rate at which such OID is
translated into U.S. dollars under the rules described below. If a U.S. Holder
purchased an Old Note with previously owned foreign currency, the holder will
recognize ordinary income or loss in an amount equal to the difference, if
any, between such holder's tax basis in the foreign currency and the U.S.
dollar fair market value of the foreign currency used to purchase such Note,
determined on the date of purchase.
For purposes of the foregoing, there is a special rule for purchases and
sales of publicly traded Sterling Notes by a cash basis taxpayer under which
units of foreign currency paid or received are translated into U.S. dollars at
the spot rate on the settlement date of the purchase or sale. In that case, no
exchange gain or loss will result from currency fluctuations between the trade
date and the settlement of such a purchase or sale. An accrual basis taxpayer
may elect the same treatment required of cash basis taxpayers with respect to
purchases and sales of publicly traded Sterling Notes, provided the election
is applied consistently. Such election cannot be changed without the consent
of the IRS.
Gain or loss realized upon the sale, exchange or retirement of a New Note
that is attributable to fluctuations in currency rates will be ordinary income
or loss, which will not be treated as interest income or expense. Gain or loss
attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the foreign currency principal amount (which
means, for this purpose, purchase price) of the Old Note, determined on the
date such payment is received or the New Note is disposed of, and the U.S.
dollar value of the foreign currency principal amount of the Old Note,
determined on the date the U.S. holder acquired the Old
81
<PAGE>
Note. Such foreign currency gain or loss will be recognized only to the extent
of the total gain or loss realized by the U.S. Holder on the sale, exchange or
retirement of the New Note.
Original Issue Discount. In the case of a Sterling Deferred Coupon Note, (i)
OID will be determined in units of foreign currency, (ii) such accrued
discount will be translated into U.S. dollars as described in "Payments of
Interest in Foreign Currency--Accrual Method" above and (iii) the amount of
the foreign currency gain or loss on the accrued discount will be determined
by comparing the amount of income received attributable to the discount
(either upon payment, maturity or an earlier disposition), as translated into
U.S. dollars at the rate of exchange on the date of such receipt, with the
amount of discount accrued, as translated above.
Exchange of Foreign Currencies. A U.S. Holder will have a tax basis in any
foreign currency received as interest or on the sale, exchange or retirement
of a Note equal to the U.S. dollar value of such foreign currency, determined
at the time the interest is received or at the time of the sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of foreign currency (including its exchange for U.S. dollars or
its use to purchase Old Notes) will be ordinary income or loss.
The above discussion assumes that any change to denominate New Notes
denominated in pounds sterling to New Notes denominated in a single European
currency ("Euros") pursuant to directives of the European counsel will not be
a taxable event for U.S. federal income tax purposes. Holders should be aware
that the IRS has announced that it is studying the conversion to Euros,
including whether conversion to a Euro-denominated currency is the appropriate
time to recognize any resulting gain or loss. Holders should consult their own
tax advisors regarding the tax effect, if any, of changing to Euro-denominated
New Notes from pounds sterling denominated New Notes.
TAXATION OF NOTES--NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a New Note that is a Non-U.S. Holder.
Subject to the discussion of backup withholding below, payments of interest
(including OID) on a New Note to any Non-U.S. Holder will generally not be
subject to U.S. federal income or withholding tax, provided that (1) the
holder is not (i) a direct or indirect owner of 10% or more of the total
voting power of all voting stock of the Company, (ii) a controlled foreign
corporation related to the Company through stock ownership or (iii) a foreign
tax-exempt organization or a foreign private foundation for U.S. federal
income tax purposes, (2) such interest payments are not effectively connected
with the conduct by the Non-U.S. Holder of a trade or business within the
United States and (3) the Company or its paying agent receives (i) from the
Non-U.S. Holder, a properly completed Form W-8 (or substitute Form W-8) under
penalties of perjury which provides the Non-U.S. Holder's name and address and
certifies that the Non-U.S. Holder of the Note is a Non-U.S. Holder or (ii)
from a security clearing organization, bank or other financial institution
that holds the Notes in the ordinary course of its trade or business (a
"financial institution") on behalf of the Non-U.S. Holder, certification under
penalties of perjury that such a Form W-8 (or substitute Form W-8) has been
received by it, or by another such financial institution, from the Non-U.S.
Holder, and a copy of the Form W-8 (or substitute Form W-8) is furnished to
the payor.
A Non-U.S. Holder that does not qualify for exemption from withholding under
the preceding paragraph generally will be subject to withholding of U.S.
federal income tax at the rate of 30% (or lower applicable treaty rate) on
payments of interest (including OID) on the New Notes.
If the payments of interest (including OID) on a New Note are effectively
connected with the conduct by a Non-U.S. Holder of a trade or business in the
United States, such payments will be subject to U.S. federal income tax on a
net basis at the rates applicable to United States persons generally (and,
with respect to corporate holders, may also be subject to a 30% branch profits
tax). If payments are subject to U.S. federal income tax on a net basis in
accordance with the rules described in the preceding sentence, such payments
will not be subject
82
<PAGE>
to United States withholding tax so long as the holder provides the Company or
its paying agent with a properly executed Form 4224. In addition, if the
Company can show to the satisfaction of the IRS that at least 80% of the gross
income from all sources for the 3-year period ending with the close of the
Company's taxable year preceding the interest payment (or such period as may
be applicable) is "active foreign business income," then such interest would
be treated as foreign source income that is not subject to U.S. withholding.
Active foreign business income is generally gross income of a corporation
derived from sources outside the U.S., or is attributable to income so derived
by a subsidiary of the corporation, which is attributable to the active
conduct of a trade or business in the foreign jurisdiction by the corporation
(or subsidiary). It is uncertain whether the Company would meet this test for
treating interest income as non-U.S. source.
Non-U.S. Holders should consult any applicable income tax treaties, which
may provide for a lower rate of withholding tax exemption from or reduction of
branch profits tax, or other rules different from those described above.
Sale, Exchange or Redemption of Notes. Subject to the discussion concerning
backup withholding, any gain realized by a Non-U.S. Holder on the sale,
exchange, retirement or other disposition of a New Note generally will not be
subject to a U.S. federal income tax, unless (i) such gain is effectively
connected with the conduct by such Non-U.S. Holder of a trade or business
within the United States, (ii) the Non-U.S. Holder is an individual who is
present in the United States for 183 days or more in the taxable year of the
disposition and certain other conditions are satisfied, or (iii) the Non-U.S.
Holder is subject to tax pursuant to the provisions of U.S. tax law applicable
to certain U.S. expatriates.
Federal Estate Tax. New Notes held (or treated as held) by an individual who
is a Non-U.S. Holder at the time of his or her death will not be subject to
U.S. federal estate tax provided that (i) the individual does not actually or
constructively own 10% or more of the total voting power of all voting stock
of the Company and (ii) income on the Notes was not effectively connected with
the conduct by such Non-U.S. Holder of a trade or business within the United
States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Payments (including OID) with respect to the New Notes and the proceeds upon
the sale or other disposition of the New Notes may be subject to the
information reporting and possible U.S. backup withholding at a 31% rate.
Backup withholding will not apply to U.S. Holders who furnish a correct
taxpayer identification number and provide other certification or who are
otherwise exempt from backup withholding. Copies of those information returns
may also be made available, under the provisions of a specific treaty or
agreement, to the tax authorities of the country in which the Non-U.S. Holder
resides.
The regulations provide that backup withholding (which generally is a
withholding tax imposed at the rate of 31% on payments to persons that fail to
furnish certain required information) and information reporting will not apply
to payments made in respect to the New Notes by the Company to a Non-U.S.
Holder, if the holder certifies as to its non-U.S. status under penalties of
perjury or otherwise establishes an exemption (provided that neither the
Company nor its paying agent has actual knowledge that the holder is a U.S.
person or that the condition of any other exemption are not, if fact,
satisfied).
The payment of the proceeds from the disposition of New Notes to or through
the United States office of any broker, U.S. or foreign, will be subject to
information reporting and possible backup withholding unless the owner
certifies as to its non-U.S. status under penalty of perjury or otherwise
establishes an exemption, provided that the broker does not have actual
knowledge that the holder is a U.S. person or that the conditions of any other
exemption are not, if fact, satisfied. The payment of the proceeds from the
disposition of a New Note to or through a non-U.S. office of a non-U.S. broker
that is not a U.S. related person will not be subject to information reporting
or backup withholding. For this purpose, a "U.S. related person" is (i) a
"controlled foreign corporation" for U.S. federal income tax purposes or (ii)
a foreign person 50% or more of whose gross income from all sources for the
three-year period ending with the close of its taxable year preceding the
payment (or for
83
<PAGE>
such part of the period that the broker has been in existence) is derived from
activities that are effectively connected with the conduct of a U.S. trade or
business.
In the case of the payment of proceeds from the disposition of New Notes to
or through a non-U.S. office of a broker that is a U.S. related person, the
regulations require information reporting on the payment unless the broker has
documentary evidence in its files that the owner is a Non-U.S. Holder and the
broker has no knowledge to the contrary. Backup withholding will not apply to
payments made through foreign offices of a broker that is a U.S. person or a
U.S. related person (absent actual knowledge that the payee is a U.S. person).
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's federal income tax liability, provided that the requisite procedures
are followed.
The Treasury Department recently promulgated final regulations regarding the
withholding and information reporting rules discussed above. In general, the
final regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify reliance standards. The final regulations are
generally effective for payments made after December 31, 1999, subject to
certain transition rules. Non-U.S. Holders should consult their own tax
advisors with respect to the impact, if any, of the final regulations.
84
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer who holds Old Notes for its own account as a result of
market-making activities or other trading activities and who receives New
Notes in exchange for Old Notes pursuant to the Exchange Offer may be a
statutory underwriter and must acknowledge that it will deliver a prospectus
in connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company acknowledges and each holder, other than a
broker-dealer, must acknowledge that it is not engaged in, does not intend to
engage in, and has no arrangement or understanding with any person to
participate in a distribution of New Notes. The Company has agreed that
starting on the Expiration Date and ending on the close of business on the
180th day following the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal state that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal.
The Company has agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for the holders of the Notes) other
than commissions or concessions of any brokers or dealers and will indemnify
the holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
85
<PAGE>
BOOK-ENTRY; DELIVERY AND FORM
THE EXCHANGE
New Notes exchanged for Old Notes through the Book-Entry Transfer Facility
may be represented by one or more Global Notes (the "Global New Notes"). The
Global New Notes will be deposited on the date of the closing of the Exchange
Offer (the "Closing Date") with the Trustee as custodian of DTC and pursuant
to a FAST Balance Certificate Agreement between the Trustee or the Registrar,
as the case may be, and DTC and registered in the name of Cede & Co., as
nominee of DTC (such nominee being referred to herein as the "Global Security
Holder").
New Notes exchanged for Old Notes which are in the form of registered
definitive certificates (the "Certificated Notes") will be issued in the form
of Certificated Notes. Such Certificated Notes may, unless the Global New
Notes has previously been exchanged for Certificated Notes, be exchanged for
an interest in the Global New Notes representing the principal amount at
maturity of New Notes being transferred.
DEPOSITORY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold notes for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between the Participants through electronic book-entry
changes in accounts of the Participants. The Participants include securities
brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may
beneficially own notes held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each note held by or on
behalf of DTC are recorded on the records of the Participants and the Indirect
Participants.
Euroclear and CEDEL hold securities for participating organizations and
facilitate the clearance and settlement of securities transactions between
their respective Participants through electronic book-entry changes in
accounts of such Participants. Euroclear and CEDEL provide to their
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Euroclear and CEDEL interface with domestic securities
markets. Euroclear and CEDEL Participants and financial institutions such as
Initial Purchasers, securities brokers and dealers, banks, trust companies and
certain other organizations. Indirect access to Euroclear or CEDEL is also
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodian relationship with a Euroclear or CEDEL
Participant, either directly or indirectly.
DTC has also advised the Company that pursuant to procedures established by
it, (i) upon deposit of the Global New Notes, DTC will credit the accounts of
Participants with portions of the principal amount of the Global New Notes
representing the New Notes and (ii) ownership of such interests in the Global
New Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global New Notes).
Investors in a Global New Note may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations (including Euroclear and CEDEL) which are Participants in such
system. Euroclear and CEDEL will hold interests in a Global New Note on behalf
of their participants through their respective depositories, which in turn
will hold such interests in the Global New Note customers' securities accounts
in their respective names on the books of DTC. The Morgan Guaranty Trust
Company, Brussels office, will initially act as depository for Euroclear, and
Citibank, N.A., will initially act as
86
<PAGE>
depository for CEDEL. All interests in a Global New Note, including those held
through Euroclear or CEDEL, may be subject to the procedures and requirements
of DTC. Those interests held through Euroclear or CEDEL may also be subject to
the procedures and requirements of such system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global New Note to such persons may be
limited to that extent. Because DTC can act only on behalf of the
Participants, which in turn act on behalf of the Indirect Participants and
certain banks, the ability of a person having beneficial interests in a Global
New Note to pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NEW NOTES WILL
NOT HAVE NEW NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL
DELIVERY OF NEW NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE
REGISTERED OWNERS OR HOLDERS OF NEW NOTES UNDER THE INDENTURES FOR ANY
PURPOSE.
Payments in respect of the principal of (and premium, if any) and interest
on a Global New Note will be made through one or more paying agents (the
"Paying Agent") appointed under the Indentures (which will initially include
the Trustee) and will be payable to DTC or its nominee in its capacity as the
registered holder under the applicable Indenture. DTC will distribute payments
to its Participants only in U.S. dollars unless a holder of a beneficial
interest in a New Global Sterling Senior Note or a New Global Sterling
Deferred Coupon Note elects to receive payments in pounds sterling in
accordance with the procedures discussed below. Under the terms of the
Indentures, the Company and the Trustee will treat the persons in whose names
the New Notes, including the Global New Notes representing the New Notes, are
registered as the owners thereof for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently, none of the
Company, the Trustee, any Transfer Agent or any agent of the Company, the
Trustee, any Transfer Agent has or will have any responsibility or liability
for (i) any aspect or accuracy of DTC's records or any Participant's or
Indirect Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Notes, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global New Notes, or (ii) any other matter relating to the actions and
practices of DTC or any of the Participants or the Indirect Participants.
In addition to acting in its capacity as Payment Agent, the Paying Agent may
act as a foreign exchange dealer for purposes of converting British pounds
sterling to U.S. dollars for distribution through DTC, as described in the
paragraph below. When acting as a foreign exchange dealer, the Paying Agent
will derive profits from such activities in addition to the fees earned by it
for its services as Paying Agent. Each such conversion will be made on such
terms, conditions, and charges not inconsistent with the terms of the New
Notes as the Paying Agent may from time to time establish in accordance with
its regular foreign exchange practices, and subject to applicable U.S. law and
regulations.
Holders of beneficial interests in the New Global Sterling Senior Notes or
New Global Sterling Deferred Coupon Notes may elect to receive payment of
principal and interest in pounds sterling or U.S. dollars, respectively, by
causing DTC through the relevant DTC Participant to notify the Paying Agent by
the time specified below of: (i) such holder's election to receive all or a
portion of such payment in pounds sterling or in U.S. dollars, respective, and
(ii) wire transfer instructions to a pounds sterling account or U.S. dollars
account, respectively. Such election in respect of any payment must be made by
the holder at the time and in the manner required by the DTC procedures
applicable from time to time and shall, in accordance with such procedures, be
irrevocable and shall relate only to such payment. DTC notifications of such
election, wire transfer instructions and the amount payable in pounds sterling
or in U.S. dollars, respectively, must be received by the Paying Agent prior
to 5:00 p.m. New York time on the fifth New York Business Day following the
relevant Record Date in the case of interest, and prior to 5:00 p.m. New York
time on the tenth day prior to the payment date for the payment of principal.
Any payments in pounds sterling or in U.S. dollars, respectively, shall be
made by wire
87
<PAGE>
transfer of same-day funds to the appropriate account designated by DTC. The
term "New York Business Day" shall mean any day other than a Saturday or
Sunday or a day on which banking institutions in New York City are authorized
or required by law or executive order to close.
The Company has been informed by Euroclear and CEDEL that, prior to each
payment date, Euroclear and CEDEL, acting on behalf of their participants,
will elect to receive payments of principal and interest in respect of the
beneficial interests in the Global New Notes representing New Sterling Senior
Notes or New Sterling Deferred Coupon Notes held by them in pounds sterling,
and principal and interest in respect of the beneficial interests in the
Global New Notes representing New USD Deferred Coupon Notes held by them in
U.S. dollars. In the event Euroclear and CEDEL become unwilling or unable to
make such an election on behalf of their Participants, each individual holder
of a beneficial interest in the Global Notes will be required to make its own
currency election (in accordance with the procedures set forth above) in order
to avoid payment in U.S. dollars.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of notes such as the New Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
as shown on the records of DTC. Payments by the Participants and the Indirect
Participants to the beneficial owners of New Notes will be governed by
standing instructions and customary practices and will not be the
responsibility of any of DTC, the Trustee, the Registrar, the Transfer Agent
or the Company. None of the Company, the Registrar, the Transfer Agent or the
Trustee will be liable for any delay by DTC or any of the Participants in
identifying the beneficial owners of the Notes, and the Company, the
Registrar, the Transfer Agent and the Trustee may conclusively rely on and
will be protected in relying on instructions from DTC or its nominee as the
registered owner of the Global Notes for all purposes.
Except for trades involving only Euroclear and CEDEL participants, interests
in the Global Notes will trade in DTC's Same-Day Funds Settlement System and
secondary market trading activity in such interests will therefore settle in
immediately available funds, subject in all cases to the rules and procedures
of DTC and the Participants. Investors in the Global New Notes related to any
of the Sterling Notes will be able to effect trades through DTC's Same-Day
Funds Settlement System only if payment for such trades is made in U.S.
dollars. Settlements in the New Sterling Notes in pounds sterling may be
arranged by the participants in any such transactions outside the facilities
of DTC.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures and will be settled in same-day funds. Transfers between
accountholders in Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between the account holders in DTC, on the one hand,
and account holders in Euroclear or CEDEL, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or CEDEL, as
the case may be, by its respective depository; however, such cross-market
transactions will require delivery of instructions to Euroclear or CEDEL, as
the case may be, by the counterparty in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or CEDEL, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depository to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Note in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear and CEDEL account holders may
not deliver instructions directly to the depositories for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL account holder purchasing an interest in a Global Note from an account
holder in DTC will be credited, and any such crediting will be reported to the
relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear or CEDEL)
immediately following the settlement date of DTC. Cash received in Euroclear
or CEDEL as a result of sales of interests in a Global New Note by or through
a Euroclear or CEDEL account holder to a Participant in DTC will be received
with value on the settlement date
88
<PAGE>
of DTC but will be available in the relevant Euroclear or CEDEL cash account
only as of the business day for Euroclear or CEDEL following DTC's settlement
date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of New Notes only at the direction of one or more
Participants to whose account with DTC interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Notes as to which such Participant or Participants has or have given
such direction. However, if any of the events described under "--Exchange of
Book Entry Notes for Certificated Notes" occurs, DTC reserves the right to
exchange the Global New Notes for Notes in certificated form and to distribute
such New Notes to its Participants.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures to
facilitate transfers of interests in the Global New Notes among account
holders in DTC and account holders of Euroclear and CEDEL, they are under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, the
Registrar, the Transfer Agent or the Trustee nor any agent of the Company, the
Registrar, the Transfer Agent or the Trustee will have any responsibility for
the performance by DTC, Euroclear or CEDEL or their respective participants,
indirect participants or account holders of their respective obligations under
the rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global New Note is exchangeable for definitive New Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depository for the Global New Note and the Company
thereupon fails to appoint a successor depository within 90 days or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of the New Notes in certificated form or (iii) there shall
have occurred and be continuing a Default or an Event of Default with respect
to the New Notes. In all cases, certificated Notes delivered in exchange for
any Global Note or beneficial interests therein will be registered in the
names, and issued in any approved denominations, requested by or on behalf of
the depository (in accordance with its customary procedures).
If certificated New Notes are issued and a holder of a certificated New Note
claims that the Note has been lost, destroyed or wrongfully taken or if such
New Note is mutilated and is surrendered to the Trustee (or, as long as the
New Notes are listed on the Luxembourg Stock Exchange, at the specified office
of the transfer agent in Luxembourg), the Company shall issue and the Trustee
shall authenticate a replacement New Note if the Trustee's and the Company's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be sufficient in the judgment of both to protect the Company, the
Trustee, any Agent or any authenticating agent from any loss which any of them
may suffer if a New Note is replaced. The Company may charge for its expenses
in replacing a New Note.
In case any such mutilated, destroyed, lost or stolen New Note has become or
is about to become due and payable, or is about to be purchased by the Company
pursuant to the provisions of the Indenture, the Company in its discretion
may, instead of issuing a new New Note, pay or purchase such New Note, as the
case may be.
89
<PAGE>
LEGAL MATTERS
The validity of the issuance of the New Notes will be passed upon by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, special counsel
for the Company.
EXPERTS
The consolidated financial statements of the Company included herein have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included herein. Such consolidated financial statements are
included herein in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The consolidated financial statements as of December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997 of Comcast
UK Cable Partners Limited and subsidiaries included herein have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports,
which are also included herein and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements as of December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997 of
Birmingham Cable Corporation Limited and Cable London PLC included herein have
been audited by Deloitte & Touche, independent auditors, as stated in their
reports, which are also included herein and have been so included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
ENFORCEABILITY OF CIVIL LIABILITIES
A substantial majority of the assets of the Company are located outside the
United States. As a result, it may not be possible for holders of the Notes to
realize in the United States upon judgments of courts of the United States
predicated upon the civil liability under the federal securities laws of the
United States. The United States and England do not currently have a treaty
providing for the reciprocal recognition and enforcement of judgments (other
than arbitration awards) in civil and commercial matters. Therefore, a final
judgment for the payment of a fixed debt or sum of money rendered by any
United States court based on civil liability, whether or not predicated solely
upon the United States federal securities laws, would not automatically be
enforceable in England. In order to enforce in England a United States
judgment, proceedings must be initiated by way of common law action before a
court of competent jurisdiction in England. An English court will, subject to
what is said below, normally order summary judgment on the basis that there is
no defense to the claim for payment and will not reinvestigate the merits of
the original dispute. In such an action, an English court will treat the
United States judgment as creating a valid debt upon which the judgment
creditor could bring an action for payment, as long as (i) the United States
court had jurisdiction over the original proceeding, (ii) the judgment is
final and conclusive on the merits, (iii) the judgment does not contravene
English public policy, (iv) the judgment must not be for a tax, penalty or a
judgment arrived at by doubling, trebling or otherwise multiplying a sum
assessed as compensation for the loss or damage sustained and (v) the judgment
has not been obtained by fraud or in breach of the principles of natural
justice. Based on the foregoing, there can be no assurance that Holders of
Notes will be able to enforce in England judgments in civil and commercial
matters obtained in any United States court. There is doubt as to whether an
English court would impose civil liability in an original action predicated
solely upon the United States federal securities laws brought in a court of
competent jurisdiction in England.
90
<PAGE>
GENERAL INFORMATION
CLEARING SYSTEMS
The International Security Identification Number ("ISIN") for the New
Sterling Senior Notes is and the Common Code is . The ISIN for the New
Sterling Deferred Coupon Notes is and the Common Code is . The ISIN
for the New USD Deferred Coupon Notes is and the Common Code is .
AUTHORIZATION
The issue of the New Notes was authorized by a resolution of the Board of
Directors of the Company on January 13, 1998.
AVAILABLE DOCUMENTS, FINANCIAL REPORTS AND INFORMATION
Copies of the Indentures and the Registration Rights Agreements referred to
herein will, so long as the Notes are listed on the Luxemburg Stock Exchange,
be available for inspection during normal business hours at the specified
office of the Luxembourg Agent.
A copy of the Certificate of Incorporation and By-laws of the Company will
be available for inspection during normal business hours at the specified
office of the Luxembourg Agent.
Whether or not required by the rules and regulations of the Commission, so
long as the Notes are outstanding, the Company will file with the Commission
and furnish to holders of Notes all quarterly and annual financial information
required to be contained in a filing with the Commission on Forms 10-Q and 10-
K (or the equivalent thereof under the Exchange Act for foreign private
issuers in the event the Company becomes a corporation organized under the
laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda
or the Cayman Islands), including a "Management's Discussion and Analysis or
Results of Operations and Financial Condition" and, with respect to the annual
information only, a report thereon by the Company's certified independent
public accountants, in each case, as required by the rules and regulations of
the Commission as in effect on March 13, 1998.
In compliance with Forms 10-Q and 10-K, the Company currently publishes
audited annual consolidated financial reports and unaudited quarterly
consolidated financial reports. As long as the Notes are listed on the
Luxembourg Stock Exchange, copies of such reports or any other reports the
Company is required to furnish to holders of the Notes in accordance with the
preceding paragraph, will be available at the specified office of the listing,
paying and transfer agent in Luxembourg. The Company does not publish
unconsolidated financial reports.
Copies of reports, proxy statements and other information concerning the
Company filed by the Company with the Commission will, as long as the Notes
are listed on the Luxembourg Stock Exchange, be available at the specified
office of the listing, paying and transfer agent in Luxembourg.
MATERIAL ADVERSE CHANGE
Except as disclosed in this Prospectus, there has been no material adverse
change in the financial position of the Company since March 31, 1998.
91
<PAGE>
ANNEX A
GLOSSARY
Broadband: A general term used to describe wide bandwidth equipment or
systems which can carry a large proportion of the electromagnetic spectrum. A
broadband communications system can deliver multiple channels and other
services.
BSkyB: British Sky Broadcasting Limited, the largest provider of
multichannel programming in the United Kingdom.
BT: British Telecommunications plc, the dominant national provider of
telecommunications services in the United Kingdom. BT, which was privatized
from 1984 to July 1993, provides both long distance and local exchange
telephone services.
Buildout: The process of installing ducts by digging, filling and covering
underground trenches in the streets which pass by the homes and businesses in
a franchise.
Cable operator: A company who has been granted a license to build and manage
a cable network.
CATV: Cable television.
Churn: Subscriber termination rates.(/1/)
Coaxial cable: Cable consisting of a central conductor surrounded by and
insulated from another conductor. It is standard material used in traditional
cable systems. Signals are transmitted through it at different frequencies,
giving greater channel capacity than is possible with twisted pair cable, but
less than is allowed by optical fiber.
Copper pair telephone networks: A telephone network where each telephone is
connected by a dedicated copper wire pair to the local telephone switch.
DTH: Abbreviation for "Direct-to-Home.' The DTH market is single dwellings,
each served by a single satellite dish, as distinct from a cable system.
DTI: Department of Trade and Industry. Grants licenses to operate and use
the physical network over which television programs and telecommunications
services may be provided.
DTT: Digital terrestrial television.
Duopoly Policy: A policy in place in the UK from 1983 to 1991, allowing only
two companies, BT and Mercury, to provide national fixed link
telecommunications services to the public.
Duopoly Review: A review of the telecommunications industry in the United
Kingdom issued by the United Kingdom Government in 1991.
Fiber miles: Route miles of fiber multiplied by the number of strands of
fiber in the cable.
GHz: Gigahertz.
Headend: Collection of satellite hardware, typically including dish,
satellite receivers, modulators and amplifiers. Signals, when processed, are
then combined for distribution within the cable network.
homes passed: The expression in common usage as the measurement of the size
of a cabled area, meaning the total number of residential premises which have
the potential to be connected to the cable system.(/1/)
- --------
(/1/) Statistical data published by sources other than the Company may not be
prepared on a basis that is entirely consistent with that used by the
Company.
92
<PAGE>
Interconnection: The point at which cable operators transfer calls to a
trunk operator, where the call is switched to the appropriate termination
point.
ITC: Independent Television Commission, the regulatory body which oversees
and licenses all types of broadcasting in the United Kingdom.
"last mile" telecommunications services: Provision of voice, data and video
services from a distribution point directly to the end user of such services.
LDL: Local delivery operator licenses granted by the ITC for the purpose of
providing the cable television program and telecommunications services.
Mercury: Mercury is part of the merged group Cable & Wireless Communications
and is a national PTO which competes directly with BT in the national and
international long-distance telephone business.
Microwave transmission: The transmission of voice or data using microwave
radio frequencies (generally above 1 GHz).
New build: Cable network installed in area not previously served.
One-2-One: Mercury's mobile telephone network in the U.K.
OFTEL: Office of Telecommunications. The licensing and monitoring body
established by the Telecommunications Act 1984, headed by the Director General
of Telecommunications.
Optical fiber: Cable made of glass fibers through which signals are
transmitted as pulses of light. Capacity for a very large number of channels
can easily be provided.
Penetration rate: The measurement of the take-up of cable services. The
number of subscribers is expressed as a percentage of the homes marketed.
PPV (Pay-per-view): Payment made for individual cable programs as opposed to
a monthly subscription for a whole channel or group of channels. Not currently
used in the UK, but envisioned as a means of providing certain popular
sporting events or blockbuster movies for which subscribers may be prepared to
make a special payment. Cannot very effectively be done on an old-fashioned
cable system but is straightforward with a system providing control of each
subscriber serviced from the headend (addressability).
Premium channels: Cable programming service available only for additional
subscription over and above the basic service.
BT's Price Cap Review: Periodic reviews of BT's price cap (the maximum rate
at which BT's prices may increase).
PTO: Public telephone operator licensed by the DTI.
Regional Areas: The six areas comprising the 16 separate franchises of the
Company being: (i) Central & Scotland, (ii) South Wales, (iii) Suburban London
(Surrey), (iv) Suburban London (Luton), (v) West Yorkshire, and (vi) Northern
Ireland.
Resiliant: A network segment with diverse routing that provides for more
than one path between points.
RPI (Retail Price Index): The United Kingdom index corresponding to the
Consumer Price Index in the United States.
RGU (revenue generating unit): A cable television account or a telephone
account (i.e., a dual customer counts as two RGUs).
SDH: Synchronous digital hierarchy (similar to SONET).
VPNs: Virtual Private Networks; provide secure delivery of private business
data over the public Internet.
93
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NTL INCORPORATED AND SUBSIDIARIES
Report of Independent Auditors........................................... F-3
Consolidated Balance Sheets as of December 31, 1997 and December 31,
1996.................................................................... F-4
Consolidated Statements of Operations for the Years Ended December 31,
1997, December 31, 1996 and December 31, 1995........................... F-5
Consolidated Statement of Shareholders' Equity (Deficiency) for the Years
Ended December 31, 1997, December 31, 1996 and December 31, 1995........ F-6
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, December 31, 1996 and December 31, 1995........................... F-7
Notes to Consolidated Financial Statements............................... F-8
Condensed Consolidated Balance Sheet as of March 31, 1998 (Unaudited).... F-28
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 1998 and 1997 (Unaudited)............................... F-29
Condensed Consolidated Statement of Shareholders' (Deficiency) for the
Three Months Ended March 31, 1998 (Unaudited)........................... F-30
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997 (Unaudited)............................... F-31
Notes to Condensed Consolidated Financial Statements (Unaudited)......... F-32
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
Independent Auditors' Report............................................. F-37
Consolidated Balance Sheet as of December 31, 1997 and December 31,
1996.................................................................... F-38
Consolidated Statement of Operations for the Years Ended December 31,
1997, December 31, 1996 and December 31, 1995........................... F-39
Consolidated Statement of Cash Flows for the Years Ended December 31,
1997, December 31, 1996 and December 31, 1995........................... F-40
Consolidated Statement of Shareholders' Equity for the Years Ended
December 31, 1997, December 31, 1996 and December 31, 1995.............. F-41
Notes to Consolidated Financial Statements............................... F-42
Condensed Consolidated Balance Sheet Quarter Ended March 31, 1998
(Unaudited)............................................................. F-57
Condensed Consolidated Statement of Operations and Accumulated Deficit
for the Three Months Ended March 31, 1998 and 1997 (Unaudited).......... F-58
Condensed Consolidated Statement of Cash Flows for the Three Months Ended
March 31, 1998 and 1997 (Unaudited)..................................... F-59
Notes to Condensed Consolidated Financial Statements (Unaudited)......... F-60
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
Independent Auditors' Report............................................. F-64
Consolidated Balance Sheet as of December 31, 1997 and December 31,
1996.................................................................... F-65
Consolidated Statement of Operations for the Years Ended December 31,
1997, December 31, 1996 and December 31, 1995........................... F-66
Consolidated Statement of Cash Flows for the Years Ended December 31,
1997, December 31, 1996 and December 31, 1995........................... F-67
Consolidated Statement of Shareholders' Equity for the Years Ended
December 31, 1997, December 31, 1996 and December 31, 1995.............. F-68
Notes to Consolidated Financial Statements............................... F-69
CABLE LONDON PLC AND SUBSIDIARIES
Independent Auditors' Report............................................. F-76
Consolidated Balance Sheet as of December 31, 1997 and December 31,
1996.................................................................... F-77
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Statement of Operations for the Years Ended December 31,
1997, December 31, 1996 and December 31, 1995............................ F-78
Consolidated Statement of Cash Flows for the Years Ended December 31,
1997, December 31, 1996 and December 31, 1995............................ F-79
Consolidated Statement of Shareholders' (Deficiency) Equity for the Years
Ended December 31, 1997, December 31, 1996 and December 31, 1995......... F-80
Notes to Consolidated Financial Statements................................ F-81
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
NTL Incorporated
We have audited the consolidated balance sheets of NTL Incorporated and
Subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity (deficiency) and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of NTL Incorporated and Subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
New York, New York
March 20, 1998
F-3
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................... $ 98,902,000 $ 445,884,000
Marketable securities........................ 4,998,000 --
Accounts receivable--trade, less allowance
for doubtful accounts of $8,056,000 (1997)
and $3,870,000 (1996)....................... 66,022,000 28,340,000
Other........................................ 67,232,000 66,817,000
-------------- --------------
Total current assets....................... 237,154,000 541,041,000
FIXED ASSETS, net.............................. 1,756,985,000 1,459,528,000
INTANGIBLE ASSETS, net......................... 364,479,000 392,933,000
OTHER ASSETS, net of accumulated amortization
of $25,889,000 (1997) and $21,789,000 (1996).. 63,021,000 61,109,000
-------------- --------------
Total assets............................... $2,421,639,000 $2,454,611,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES
Accounts payable............................. $ 45,475,000 $ 57,960,000
Accrued expenses and other................... 181,605,000 101,228,000
Accrued construction costs................... 26,930,000 62,723,000
Deferred revenue............................. 35,060,000 16,491,000
Deferred purchase price...................... -- 60,537,000
-------------- --------------
Total current liabilities.................. 289,070,000 298,939,000
LONG-TERM DEBT................................. 2,015,057,000 1,732,168,000
OTHER.......................................... 428,000 459,000
COMMITMENTS AND CONTINGENT LIABILITIES
DEFERRED INCOME TAXES.......................... 70,218,000 94,931,000
SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK,
$.01 par value, plus accreted dividends;
liquidation preference $107,000,000; less
unamortized discount of $3,444,000 (1997);
issued and outstanding 110,000 shares (1997)
and none (1996)............................... 108,534,000 --
SHAREHOLDERS' EQUITY (DEFICIENCY)
Series preferred stock--$.01 par value;
authorized 2,500,000 shares; liquidation
preference $78,000,000; issued and
outstanding 780 shares (1997 and 1996)...... -- --
Common stock--$.01 par value; authorized
100,000,000 shares; issued and outstanding
32,210,000 (1997) and 32,066,000 (1996)
shares...................................... 322,000 321,000
Additional paid-in capital................... 538,054,000 548,647,000
Cumulative translation adjustment............ 117,008,000 163,141,000
(Deficit).................................... (717,052,000) (383,995,000)
-------------- --------------
(61,668,000) 328,114,000
-------------- --------------
Total liabilities and shareholders' equity
(deficiency).............................. $2,421,639,000 $2,454,611,000
============== ==============
</TABLE>
See accompanying notes.
F-4
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES
Local telecommunications and
television..................... $ 189,407,000 $ 89,209,000 $ 24,804,000
National and international
telecommunications............. 162,738,000 45,430,000 --
Broadcast transmission and
other.......................... 130,799,000 83,618,000 --
Other telecommunications........ 8,831,000 10,086,000 8,937,000
------------- ------------- -------------
491,775,000 228,343,000 33,741,000
COSTS AND EXPENSES
Operating expenses.............. 301,644,000 144,315,000 24,415,000
Selling, general and
administrative expenses........ 169,133,000 114,992,000 57,932,000
Franchise fees.................. 23,587,000 13,117,000 --
Corporate expenses.............. 18,324,000 14,899,000 14,697,000
Nonrecurring charges............ 20,642,000 -- --
Depreciation and amortization... 150,509,000 98,653,000 29,823,000
------------- ------------- -------------
683,839,000 385,976,000 126,867,000
------------- ------------- -------------
Operating (loss).............. (192,064,000) (157,633,000) (93,126,000)
OTHER INCOME (EXPENSE)
Interest and other income....... 28,415,000 33,634,000 21,185,000
Interest expense................ (202,570,000) (137,032,000) (28,379,000)
Other gains..................... 21,497,000 -- --
Foreign currency transaction
gains.......................... 574,000 2,408,000 84,000
------------- ------------- -------------
(Loss) before income taxes,
minority interests and
extraordinary item............. (344,148,000) (258,623,000) (100,236,000)
Income tax benefit (provision).. 15,591,000 (7,653,000) 2,477,000
------------- ------------- -------------
(Loss) before minority interests
and extraordinary item......... (328,557,000) (266,276,000) (97,759,000)
Minority interests.............. -- 11,822,000 6,974,000
------------- ------------- -------------
(Loss) before extraordinary
item........................... (328,557,000) (254,454,000) (90,785,000)
Loss from early extinguishment
of debt........................ (4,500,000) -- --
------------- ------------- -------------
Net (loss).................... $(333,057,000) $(254,454,000) $ (90,785,000)
============= ============= =============
BASIC AND DILUTED NET (LOSS) PER
COMMON SHARE
(Loss) before extraordinary
item........................... $ (10.60) $ (8.20) $ (3.01)
Extraordinary item.............. (.14) -- --
------------- ------------- -------------
Net (loss) per common share... $ (10.74) $ (8.20) $ (3.01)
============= ============= =============
</TABLE>
See accompanying notes.
F-5
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
SERIES COMMON STOCK--
PREFERRED STOCK $.01 PAR VALUE ADDITIONAL CUMULATIVE
----------------- ------------------- PAID-IN TRANSLATION
SHARES PAR SHARES PAR CAPITAL ADJUSTMENT (DEFICIT)
----------------- ---------- -------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1994................... 22,635,000 $226,000 $462,197,000 $ 12,867,000 $ (38,756,000)
Exercise of stock
options............... 20,000 1,000 101,000
Stock split............ 7,547,000 75,000 (75,000)
Net loss for the year
ended December 31,
1995.................. (90,785,000)
Currency translation
adjustment............ (6,594,000)
---------- -------- ------------ ------------ -------------
BALANCE, DECEMBER 31,
1995................... 30,202,000 302,000 462,223,000 6,273,000 (129,541,000)
Exercise of stock
options............... 396,000 4,000 1,362,000
Exercise of warrants... 53,000 1,000 298,000
Issuance of warrants in
connection with
consent
solicitations......... 1,641,000
Shares issued for
acquisitions.......... 780 $ -- 1,415,000 14,000 83,123,000
Net loss for the year
ended December 31,
1996.................. (254,454,000)
Currency translation
adjustment............ 156,868,000
------ -------- ---------- -------- ------------ ------------ -------------
BALANCE, DECEMBER 31,
1996................... 780 -- 32,066,000 321,000 548,647,000 163,141,000 (383,995,000)
Exercise of stock
options............... 119,000 1,000 1,532,000
Exercise of warrants... 25,000 138,000
Accreted dividends on
senior redeemable
exchangeable preferred
stock................. (11,978,000)
Accretion of discount
on senior redeemable
exchangeable preferred
stock................. (285,000)
Net loss for the year
ended December 31,
1997.................. (333,057,000)
Currency translation
adjustment............ (46,133,000)
------ -------- ---------- -------- ------------ ------------ -------------
BALANCE, DECEMBER 31,
1997................... 780 $ -- 32,210,000 $322,000 $538,054,000 $117,008,000 $(717,052,000)
====== ======== ========== ======== ============ ============ =============
</TABLE>
See accompanying notes.
F-6
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
------------- -------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss........................ $(333,057,000) $ (254,454,000) $ (90,785,000)
Adjustment to reconcile net loss
to net cash (used in) operating
activities:
Depreciation and amortization... 150,509,000 98,653,000 29,823,000
Loss from early extinguishment
of debt........................ 4,500,000 -- --
Amortization of noncompetition
agreements..................... 1,852,000 2,906,000 3,256,000
Provision for losses on
accounts receivable............ 6,891,000 2,597,000 709,000
Minority interests.............. -- (11,822,000) (6,974,000)
Deferred income taxes........... (16,852,000) 5,063,000 --
Amortization of original issue
discount....................... 122,639,000 104,264,000 29,379,000
Other........................... (8,148,000) 8,578,000 6,229,000
Changes in operating assets and
liabilities, net of effect
from business acquisitions:
Accounts receivable............ (30,430,000) 10,050,000 (6,496,000)
Other current assets........... (6,563,000) (20,316,000) (6,749,000)
Other assets................... 2,303,000 (24,000) (123,000)
Accounts payable............... (4,615,000) (2,869,000) 20,583,000
Accrued expenses and other..... 74,706,000 35,691,000 9,926,000
Deferred revenue............... 18,994,000 278,000 1,075,000
------------- -------------- -------------
Net cash (used in) operating
activities................... (17,271,000) (21,405,000) (10,147,000)
INVESTING ACTIVITIES
Purchase of fixed assets........ (503,656,000) (505,664,000) (445,550,000)
Payment of deferred purchase
price.......................... (57,330,000) -- --
Increase in other assets........ (4,322,000) (6,013,000) (3,361,000)
Acquisitions of subsidiaries and
minority interests, net of cash
acquired....................... -- (332,693,000) (12,412,000)
Purchase of marketable
securities..................... (145,939,000) -- --
Proceeds from sales of
marketable securities.......... 142,596,000 -- --
------------- -------------- -------------
Net cash (used in) investing
activities................... (568,651,000) (844,370,000) (461,323,000)
FINANCING ACTIVITIES
Proceeds from borrowings and
sale of preferred stock, net of
financing costs................ 490,302,000 1,146,190,000 326,166,000
Principal payments.............. (242,424,000) (95,283,000) (9,963,000)
Cash released from escrow....... -- 1,600,000 2,810,000
Capital contribution from
minority partner............... -- -- 12,626,000
Proceeds from borrowings from
minority partner............... -- 31,232,000 19,065,000
Proceeds from exercise of stock
options and warrants........... 1,671,000 1,665,000 102,000
------------- -------------- -------------
Net cash provided by financing
activities................... 249,549,000 1,085,404,000 350,806,000
EFFECT OF EXCHANGE RATE CHANGES
ON CASH......................... (10,609,000) 50,972,000 1,345,000
------------- -------------- -------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................ (346,982,000) 270,601,000 (119,319,000)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR............... 445,884,000 175,283,000 294,602,000
------------- -------------- -------------
CASH AND CASH EQUIVALENTS AT END
OF YEAR......................... $ 98,902,000 $ 445,884,000 $ 175,283,000
============= ============== =============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid during the period for
interest exclusive of amounts
capitalized.................... $ 72,047,000 $ 27,595,000 $ 1,735,000
Income taxes paid............... 1,107,000 367,000 1,695,000
SUPPLEMENTAL SCHEDULE OF NONCASH
FINANCING ACTIVITIES
Accretion of dividends and
discount on senior redeemable
exchangeable preferred stock... $ 12,263,000 $ -- $ --
Warrants issued in connection
with consent solicitations..... -- 1,641,000 --
Common stock issued for
acquisition.................... -- 34,137,000 --
Preferred stock issued for
acquisition of minority
interest, including notes
payable to minority partner.... -- 49,000,000 --
Liabilities incurred in
connection with acquisitions... -- 81,906,000 --
</TABLE>
See accompanying notes.
F-7
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
NTL Incorporated (the "Company"), through its subsidiaries and joint
ventures, owns and operates television and radio broadcasting, cable
television, telephone and telecommunications systems in the United Kingdom and
provides long-distance telephone service in the United States. Based on
revenues and identifiable assets, the Company's predominant lines of business
are television and radio broadcasting, cable television, telephone and
telecommunications services in the United Kingdom.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries and entities where the Company's interest is
greater than 50%. Significant intercompany accounts and transactions have been
eliminated in consolidation.
Foreign Currency Translation
The financial statements of the Company's foreign subsidiaries have been
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation." All
balance sheet accounts have been translated using the current exchange rates
at the respective balance sheet dates. Statement of operations amounts have
been translated using the average exchange rates for the respective years. The
gains or losses resulting from the change in exchange rates have been reported
separately as a component of shareholders' equity (deficiency).
Cash Equivalents
Cash equivalents are short-term highly liquid investments purchased with a
maturity of three months or less. Cash equivalents were $55,894,000 and
$339,249,000 at December 31, 1997 and 1996, respectively, which consisted
primarily of repurchase agreements and corporate commercial paper. At December
31, 1997 and 1996, none and $238,862,000, respectively, of such cash
equivalents were denominated in British pounds sterling.
Marketable Securities
Marketable securities are classified as available-for-sale, which are
carried at fair value. Unrealized holding gains and losses on securities, net
of tax, are carried as a separate component of shareholders' equity
(deficiency). The amortized cost of debt securities is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income. Realized gains and losses and
declines in value judged to be other than temporary will be included in
interest income. The cost of securities sold or matured is based on the
specific identification method. Interest on securities is included in interest
income.
Marketable securities at December 31, 1997 consist of federal agency notes.
During the year ended December 31, 1997, there were no realized gains or
losses on sales of securities. All of the marketable securities as of December
31, 1997 had a contractual maturity of less than one year.
F-8
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Fixed Assets
Fixed assets are stated at cost, which includes amounts capitalized for
labor and overhead expended in connection with the design and installation of
operating equipment. Depreciation is computed by the straight-line method over
the estimated useful lives of the assets. Estimated useful lives are as
follows: operating equipment--5 to 40 years and other equipment--3 to 22.5
years.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the fair
value and the carrying value of the asset.
Intangible Assets
Intangible assets include goodwill and license acquisition costs. Goodwill
is the excess of the purchase price over the fair value of net assets acquired
in business combinations accounted for as purchases. Goodwill is amortized on
a straight-line basis over the periods benefited, principally 30 years.
License acquisition costs represent the portion of purchase price allocated to
the cable television and telecommunications licenses acquired in business
combinations. License acquisition costs are amortized on a straight-line basis
over the remaining life of the license as follows: cable television license--7
to 12 years and telecommunications license--23 years. The Company continually
reviews the recoverability of the carrying value of these assets using the
same methodology that it uses for the evaluation of its other long-lived
assets.
Other Assets
Other assets consist primarily of noncompetition agreements obtained in
exchange for the issuance of warrants to purchase an aggregate of 899,000
shares of common stock and deferred financing costs. The noncompetition
agreements were valued at the difference between the fair market value of the
common stock on the date of grant and the exercise price of the warrants. The
noncompetition agreements are being expensed on a straight-line basis over the
noncompetition period of primarily five years. Deferred financing costs were
incurred in connection with the issuance of debt and are amortized over the
term of the related debt.
Capitalized Interest
Interest is capitalized as a component of the cost of fixed assets
constructed. In 1997, 1996 and 1995, interest of $6,770,000, $10,294,000 and
$12,183,000, respectively, was capitalized.
Revenue Recognition
Revenues are recognized at the time the service is provided to the customer.
Cable Television System Costs, Expenses and Revenues
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable television, telephone and
telecommunications systems in accordance with SFAS No. 51, "Financial
Reporting by Cable Television Companies."
Advertising Expense
The Company expenses the cost of advertising as incurred. Advertising costs
were $31,003,000, $22,727,000 and $10,370,000 in 1997, 1996 and 1995,
respectively.
F-9
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net (Loss) Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share". SFAS 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic earnings per share
excludes any dilutive effects of options, warrants and convertible securities.
Diluted earnings per share is very similar to the previously reported fully
diluted earnings per share. The Company adopted SFAS No. 128 for each of the
three years in the period ended December 31, 1997.
Stock-Based Compensation
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company applies APB Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock option plans.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
3. RECENT ACCOUNTING PRONOUNCEMENTS
Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence
as other financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. The Company will adopt SFAS No. 130 in the
first interim period for its fiscal year ending December 31, 1998.
Segment Reporting
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997. The Company will adopt SFAS No. 131 for its
fiscal year ending December 31, 1998.
4. CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
Need for Additional Financing
The Company will require additional financing in the future. There can be no
assurance that the required financing will be obtainable on acceptable terms.
Requirements to Meet Build Milestones
The telecommunications license for each United Kingdom franchise contains
specific construction milestones. Based on current network construction
scheduling, the Company believes it will be able to satisfy its milestones in
the future, but there can be no assurance that such milestones will be met. If
the Company is unable
F-10
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
to meet the construction milestones required by any of its licenses and is
unable to obtain modifications to the milestones, the relevant licenses could
be revoked.
Concentrations
The Company's television and radio broadcasting business is substantially
dependent upon contracts with a small group of companies for the right to
broadcast their programming, and upon a site sharing agreement for a large
number of its transmission sites. The loss of any one of these contracts or
the site sharing agreement could have a material adverse effect on the
business of the Company.
Limited Access to Programming
The Company's ability to make a competitive offering of cable television
services is dependent on the Company's ability to obtain access to programming
at a reasonable cost. There can be no assurance that the Company's current
programming will continue to be available on acceptable commercial terms or at
all.
Currency Risk
To the extent that the Company obtains financing in United States dollars
and incurs construction and operating costs in British pounds sterling, it
will encounter currency exchange rate risks. In addition, the Company's
revenues are generated primarily in British pounds sterling while its interest
and principal obligations with respect to most of the Company's existing
indebtedness are payable in United States dollars. The Company has entered
into an option agreement to hedge some of the risk of exchange rate
fluctuations related to interest payments on United States dollar denominated
debt.
5. FIXED ASSETS
Fixed assets consists of:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Operating equipment.......................... $1,612,440,000 $1,080,135,000
Other equipment.............................. 225,514,000 197,368,000
Construction-in-progress..................... 134,795,000 305,372,000
-------------- --------------
1,972,749,000 1,582,875,000
Accumulated depreciation..................... (215,764,000) (123,347,000)
-------------- --------------
$1,756,985,000 $1,459,528,000
============== ==============
</TABLE>
6. INTANGIBLE ASSETS
Intangible assets consists of:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1997 1996
------------ ------------
<S> <C> <C>
License acquisition costs, net of accumulated
amortization of $46,620,000 (1997) and
$34,894,000 (1996)............................. $123,116,000 $134,909,000
Goodwill, net of accumulated amortization of
$13,449,000 (1997) and $5,986,000 (1996)....... 241,363,000 258,024,000
------------ ------------
$364,479,000 $392,933,000
============ ============
</TABLE>
F-11
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In October 1996, the Company acquired the remaining 40% interest it did not
already own in CableTel Newport in exchange for 780 shares of the Company's
Series A Preferred Stock. CableTel Newport owns and operates cable television,
telephone and telecommunications franchises in South Wales. The Series A
Preferred Stock was valued at $49,000,000, based on an appraisal as of the
date of issuance. The fair value of the net tangible assets acquired of
$67,710,000 exceeded the aggregate purchase price of $49,062,000 (including
costs incurred of $62,000) by $18,648,000, which is classified as a reduction
to license acquisition costs.
In September 1996, the Company acquired the remaining 30% minority interest
of English Cable Enterprises, Inc. ("ECE") that the Company did not own, in
exchange for 1,415,000 shares of its common stock. ECE, through its
subsidiaries, owns four cable television, telephone and telecommunications
licenses in the northern suburbs of London. The value of the shares, based on
the market price on the date of issuance, of $34,137,000 plus costs incurred
of $204,000 exceeded the fair value of the net tangible assets acquired by
$28,649,000, which is classified as license acquisition costs.
In May 1996, an indirect wholly-owned subsidiary of the Company, NTL
Investment Holdings Limited ("NTLIH"), acquired NTL Group Limited for payments
of approximately (Pounds)204,000,000 at closing, (Pounds)17,100,000 in October
1996 and (Pounds)35,000,000 in May 1997. NTL Group Limited provides television
and radio transmission services and a range of other services in the
broadcasting and telecommunications industries. This acquisition has been
accounted for as a purchase, and, accordingly, the net assets and results of
operations of NTL Group Limited have been included in the consolidated
financial statements from the date of acquisition. The aggregate purchase
price of (Pounds)256,100,000 ($439,000,000) plus costs incurred of $3,700,000
exceeded the fair value of the net tangible assets acquired by $263,000,000,
which is classified as goodwill.
The pro forma unaudited consolidated results of operations for the year
ended December 31, 1996 assuming consummation of the above mentioned
transactions as of January 1, 1996 is as follows:
<TABLE>
<S> <C>
Total revenue............................................... $ 289,638,000
Net loss.................................................... (265,180,000)
Basic and diluted net loss per share........................ (8.31)
</TABLE>
In October 1995, CableTel South Wales Limited, a wholly-owned subsidiary of
CableTel Newport, acquired the cable television business of Metro Cable TV
Limited in South Wales ("Metro Wales"), and CableTel Central Hertfordshire
Limited, a wholly-owned subsidiary of ECE, acquired the cable television
business of Metro Cable TV Limited in Hertfordshire ("Metro Herts"), for an
aggregate consideration of $12,125,000. These acquisitions have been accounted
for as purchases, and, accordingly, the net assets and results of operations
of Metro Wales and Metro Herts have been included in the consolidated
financial statements from the date of acquisition. The aggregate purchase
price exceeded the fair value of the net tangible assets acquired by
$10,167,000, which is classified as license acquisition costs. In 1996, the
Metro Wales license acquisition costs were reduced by $565,000.
F-12
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1997 1996
-------------- --------------
<S> <C> <C>
10 7/8% Senior Deferred Coupon Notes
("10 7/8% Notes")(a)......................... $ 194,959,000 $ 175,368,000
12 3/4% Series A Senior Deferred Coupon Notes
("12 3/4% Notes")(b)......................... 209,387,000 185,043,000
11 1/2% Series B Senior Deferred Coupon Notes
("11 1/2% Notes")(c)......................... 743,961,000 665,257,000
10% Series B Senior Notes
("10% Notes")(d)............................. 400,000,000 --
7 1/4% Convertible Subordinated Notes
("7 1/4% Convertible Notes")(e).............. 191,750,000 191,750,000
7% Convertible Subordinated Notes
("7% Convertible Notes")(f).................. 275,000,000 275,000,000
Term Loan and Revolving Facility(g)........... -- 239,750,000
-------------- --------------
$2,015,057,000 $1,732,168,000
============== ==============
</TABLE>
- --------
(a) In October 1993, the Company issued $212,000,000 aggregate principal
amount of 10 7/8% Senior Deferred Coupon Notes due 2003. The 10 7/8% Notes
were issued at a price to the public of 58.873% or $124,811,000. The
Company incurred $5,019,000 in fees and expenses which is included in
deferred financing costs. The original issue discount on the 10 7/8% Notes
accretes at a rate of 10 7/8%, compounded semiannually, to an aggregate
principal amount of $212,000,000 by October 15, 1998. Interest will
thereafter accrue at 10 7/8% per annum, payable semiannually beginning on
April 15, 1999. During 1997, 1996 and 1995, the Company recognized
$19,591,000, $17,620,000 and $15,851,000, respectively, of the original
issue discount as interest expense.
The 10 7/8% Notes are effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries. The 10 7/8% Notes may be redeemed at the Company's option, in
whole or in part, at any time on or after October 15, 1998 at 103.107% the
first year, 101.554% the second year and 100% thereafter, plus accrued and
unpaid interest to the date of redemption. The indenture governing the
10 7/8% Notes contains restrictions relating to, among other things: (i)
incurrence of additional indebtedness and issuance of preferred stock; (ii)
dividend and other payment restrictions; and (iii) mergers, consolidations
and sales of assets.
(b) In April 1995, the Company issued $277,803,500 aggregate principal amount
of 12 3/4% Senior Deferred Coupon Notes due 2005. The 12 3/4% Notes were
issued at a price to the public of 53.995% or $150,000,000. The Company
incurred $6,192,000 in fees and expenses in connection with the issuance
of 12 3/4% Notes which is included in deferred financing costs. The
original issue discount accretes at a rate of 12 3/4%, compounded
semiannually, to an aggregate principal amount of $277,803,500 by April
15, 2000. Interest will thereafter accrue at 12 3/4% per annum, payable
semiannually beginning on October 15, 2000. During 1997, 1996 and 1995,
the Company recognized $24,344,000, $21,515,000 and $13,528,000,
respectively, of original issue discount as interest expense.
The 12 3/4% Notes are effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries, rank pari passu in right of payment with all senior unsecured
indebtedness and rank senior in right of payment to all subordinated
indebtedness of the Company. The 12 3/4% Notes may be redeemed at the
Company's option, in whole or in part, at any time on
F-13
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
or after April 15, 2000 at 103.64% the first year, 101.82% the second year
and 100% thereafter, plus accrued and unpaid interest to the date of
redemption. The indenture governing the 12 3/4% Notes contains restrictions
relating to, among other things: (i) incurrence of additional indebtedness
and issuance of preferred stock, (ii) dividend and other payment
restrictions and (iii) mergers, consolidations and sales of assets.
(c) In January 1996, the Company issued $1,050,000,000 aggregate principal
amount of 11 1/2% Series B Senior Deferred Coupon Notes due 2006. The
11 1/2% Notes were issued at a price to investors of 57.155% of the
aggregate principal amount at maturity or $600,127,500. The Company incurred
$19,273,000 in fees and expenses in connection with the issuance of the
11 1/2% Notes which is included in deferred financing costs. The original
issue discount accretes at a rate of 11 1/2%, compounded semiannually, to an
aggregate principal amount of $1,050,000,000 by February 1, 2001. Interest
will thereafter accrue at 11 1/2% per annum, payable semiannually beginning
on August 1, 2001. During 1997 and 1996, the Company recognized $78,704,000
and $65,129,000 of original issue discount as interest expense.
The 11 1/2% Notes are effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries, rank pari passu in right of payment with all senior unsecured
indebtedness and rank senior in right of payment to all subordinated
indebtedness of the Company. The 11 1/2% Notes may be redeemed at the
Company's option, in whole or in part, at any time on or after February 1,
2001 at 105.75% the first year, 102.875% the second year and 100%
thereafter, plus accrued and unpaid interest to the date of redemption. The
indenture governing the 11 1/2% Notes contains restrictions relating to,
among other things: (i) incurrence of additional indebtedness and issuance
of preferred stock; (ii) dividend and other payment restrictions and (iii)
mergers, consolidations and sales of assets.
(d) In February 1997, the Company issued $400,000,000 aggregate principal
amount of 10% Senior Notes due 2007. The Company received net proceeds of
$389,000,000 after discounts and commissions from the issuance of the 10%
Notes. Discounts, commissions and other fees incurred of $11,885,000 are
included in deferred financing costs. The 10% Notes accrue interest at 10%
per annum, payable semiannually as of August 15, 1997.
The 10% Notes are effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries. The 10% Notes may be redeemed at the Company's option, in
whole or in part, at any time on or after February 15, 2002 at a redemption
price of 105% that declines annually to 100% in 2005, in each case together
with accrued and unpaid interest to the date of redemption. The indenture
governing the 10% Notes contains restrictions relating to, among other
things: (i) incurrence of additional indebtedness and the issuance of
preferred stock, (ii) dividend and other payment restrictions and (iii)
mergers, consolidations and sales of assets.
(e) In April and May 1995, the Company issued $191,750,000 principal amount of
7 1/4% Convertible Subordinated Notes due 2005. Interest payments began on
October 15, 1995 and interest is payable every six months thereafter. The
7 1/4% Convertible Notes will mature on April 15, 2005. The 7 1/4%
Convertible Notes are unsecured obligations convertible into shares of
common stock prior to maturity at a conversion price of $27.56 per share,
subject to adjustment. There are approximately 6,958,000 shares of common
stock reserved for issuance upon the conversion of the 7 1/4% Convertible
Notes. The 7 1/4% Convertible Notes are redeemable, in whole or in part,
at the option of the Company at any time on or after April 15, 1998, at a
redemption price of 105.08% that declines annually to 100.73% in 2004, in
each case together with accrued interest to the redemption date. The
Company incurred $6,822,000 in fees and expenses in connection with the
issuance of the 7 1/4% Convertible Notes, which is included in deferred
financing costs.
In March 1998, the Company announced that it was calling for redemption all
of the 7 1/4% Convertible Notes. The redemption date is April 20, 1998 and
the redemption price is 105.08% of the principal amount, plus accrued and
unpaid interest through the date of redemption.
F-14
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(f) In June 1996, the Company issued $275,000,000 aggregate principal amount
of 7% Convertible Subordinated Notes due 2008. Interest payments began on
December 15, 1996 and interest is payable every six months thereafter. The
7% Convertible Notes mature on June 15, 2008. The 7% Convertible Notes are
unsecured obligations convertible into shares of common stock prior to
maturity at a conversion price of $37.875 per share, subject to
adjustment. There are approximately 7,261,000 shares of common stock
reserved for issuance upon conversion of the 7% Convertible Notes. The 7%
Convertible Notes are redeemable, in whole or in part, at the option of
the Company at any time on or after June 15, 1999, at a redemption price
of 104.9% that declines annually to 100% in 2006, in each case together
with accrued and unpaid interest to the redemption date. The Company
incurred $8,616,000 in fees and expenses in connection with the issuance
of the 7% Convertible Notes, which is included in deferred financing
costs.
(g) To finance a substantial portion of the purchase price for NTL Group
Limited, NTLIH obtained from a syndicate of lenders senior secured loan
facilities (the "NTLIH Facility") of a maximum principal amount of
(Pounds)165,000,000 comprised of: (i) a long-term loan facility of
(Pounds)140,000,000 and (ii) a revolving credit facility of
(Pounds)25,000,000. One of the Lenders also made available to NTLIH a
secured loan facility of (Pounds)60,000,000 (the "Bridge Facility") to
finance the remainder of the payment due at closing and acquisition costs
and expenses due at closing. Loans under the NTLIH Facility incurred
interest at an annual rate equal to LIBOR plus a margin that varied from
0.75% per annum to 1.75% per annum, based on certain financial ratios of
NTLIH and certain of its subsidiaries. Interest was payable either
monthly, quarterly or semiannually, at the option of NTLIH. The effective
interest rate on the NTLIH Facility at December 31, 1996 was 7.972%. The
Bridge Facility was repaid in full in August 1996. In October 1997, the
principal and accrued interest outstanding under the NTLIH Facility of
(Pounds)140,138,000 ($231,466,000) was repaid using cash on hand.
In 1997, NTL (UK) Group, Inc., a wholly-owned subsidiary of the Company,
which is the holding company for the United Kingdom operations and the
parent company of NTLIH, and NTLIH entered into an agreement with The Chase
Manhattan Bank pursuant to which Chase has agreed to fully underwrite a
(Pounds)555,000,000, eight-year term loan facility with an initial four-year
revolving period. By April 14, 1999, Chase's commitment will be reduced to
no less than (Pounds)480,000,000 or such greater amount as is necessary to
ensure that the Company's United Kingdom operations remain fully funded by
reference to an agreed business plan. The facility will be used to finance
capital expenditures and working capital for the Company's United Kingdom
operations, including its local broadband, national telecommunications and
national digital television networks. A portion of the facility
((Pounds)75,000,000) is conditional upon the execution of contracts to
provide digital television transmission services to certain third parties.
Chase has provided a portion of the (Pounds)555,000,000 facility in the form
of a (Pounds)350,000,000 facility to the Company on the same terms as to
restrictions, covenants, guarantees and security as the (Pounds)555,000,000
facility. As of March 20, 1998, (Pounds)10,000,000 ($16,517,000) is
outstanding under the (Pounds)350,000,000 facility. The principal amount
outstanding under the (Pounds)350,000,000 facility is required to be repaid
on December 31, 2005. Interest is payable either monthly, quarterly or semi-
annually, at the option of NTLIH, at LIBOR plus, at a maximum, 2.25% per
annum. The commitment fee is .375% per annum on the unutilized portion of
the (Pounds)350,000,000 facility and is payable quarterly in arrears. The
facility is secured by first fixed and floating charges over all present and
future assets and undertakings of the United Kingdom group. The facility
contains customary financial covenants, and certain restrictions relating
to, among other things: (i) incurrence of additional indebtedness or
guarantees, (ii) investments, acquisitions and mergers and (iii) dividend
and other payment restrictions. In the absence of a default, the facility
generally permits payments to the Company to pay interest and principal of
existing indebtedness of the Company. At December 31, 1997, restricted net
assets were approximately $1,861,000,000.
F-15
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In March 1998, the Company issued (Pounds)125,000,000 aggregate principal
amount of 9 1/2% Senior Notes due 2008 (the "Sterling Senior Notes"),
(Pounds)300,000,000 aggregate principal amount of 10 3/4% Senior Deferred
Coupon Notes due 2008 (the "Sterling Deferred Coupon Notes") and
$1,300,000,000 aggregate principal amount of 9 3/4% Senior Deferred Coupon
Notes due 2008 (the "Dollar Deferred Coupon Notes") (together the "New
Notes"). The Sterling Senior Notes, Sterling Deferred Coupon Notes and the
Dollar Deferred Coupon Notes were issued at a price to the public of 99.67%
or (Pounds)124,588,000, 58.62% or (Pounds)175,860,000 and 61.724% or
$802,412,000, respectively. The Company received net proceeds of
(Pounds)121,161,000, (Pounds)170,584,000 and $778,340,000, after discounts
and commissions, from the issuance of the Sterling Senior Notes, the
Sterling Deferred Coupon Notes and the Dollar Deferred Coupon Notes,
respectively.
The original issue discount of the Sterling Deferred Coupon Notes accretes
at a rate of 10 3/4%, compounded semiannually, to an aggregate principal
amount of (Pounds)300,000,000 by April 1, 2003. The original issue discount
of the Dollar Deferred Coupon Notes accretes at a rate of 9 3/4%,
compounded semiannually, to an aggregate principal amount of $1,300,000,000
by April 1, 2003. Interest on each of the Sterling Deferred Coupon Notes
and the Dollar Deferred Coupon Notes will thereafter accrue at 10 3/4% per
annum and 9 3/4% per annum, respectively, payable semiannually, beginning
on October 1, 2003. The Sterling Senior Notes accrue interest at 9 1/2% per
annum, payable semiannually, beginning on October 1, 1998.
The New Notes are effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries, rank pari passu in right of payment with each other and with
all senior unsecured indebtedness of the Company and rank senior in right
of payment to all subordinated indebtedness of the Company.
The New Notes may be redeemed at the Company's option, in whole or in part,
at any time on or after April 1, 2003, at a redemption price of 104 3/4% to
105 3/8% that declines annually to 100% in 2006, in each case together with
accrued and unpaid interest to the date of redemption.
The indentures governing the New Notes contain restrictions relating to,
among other things: (i) incurrence of additional indebtedness and the
issuance of preferred stock, (ii) dividend and other payment restrictions
and (iii) mergers, consolidations and sales of assets.
8. REDEEMABLE PREFERRED STOCK
In February 1997, the Company issued $100,000,000 of its 13% Senior
Redeemable Exchangeable Preferred Stock (the "Redeemable Preferred Stock").
The Company received net proceeds of $96,625,000 after discounts and
commissions from the issuance of the Redeemable Preferred Stock. Discounts,
commissions and other fees incurred of $3,729,000 were recorded as unamortized
discount at issuance.
Of the 2,500,000 authorized shares of Series Preferred Stock, 100,000 shares
of Redeemable Preferred Stock were issued. Dividends accrue at 13% per annum
($130 per share) and are payable quarterly in arrears as of May 15, 1997.
Dividends, whether or not earned or declared, will accrue without interest
until declared and paid, which declaration may be for all or part of the
accrued dividends. Dividends accruing on or prior to February 15, 2004 may, at
the option of the Company, be paid in cash, by the issuance of additional
Redeemable Preferred Stock or in any combination of the foregoing. As of
December 31, 1997, the Company has accrued $11,978,000 for dividends and has
issued approximately 10,000 shares for $10,187,000 of such accrued dividends.
The Redeemable Preferred Stock may be redeemed, at the Company's option, in
whole or in part, at any time on or after February 15, 2002 at a redemption
price of 106.5% of the liquidation preference of $1,000 per share that
declines annually to 100% in 2005, in each case together with accrued and
unpaid dividends to the redemption date. The Redeemable Preferred Stock is
subject to mandatory redemption on February 15, 2009. On any scheduled
dividend payment date, the Company may, at its option, exchange all of the
shares of Redeemable Preferred Stock then outstanding for the Company's 13%
Subordinated Exchange Debentures due 2009 (the "Subordinated Debentures").
F-16
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Subordinated Debentures, if issued, will bear interest at a rate of 13%
per annum, payable semiannually in arrears on February 15 and August 15 of
each year commencing with the first such date to occur after the date of
exchange. Interest accruing on or prior to February 15, 2004 may, at the
option of the Company, be paid in cash, by the issuance of additional
Subordinated Debentures or in any combination of the foregoing. The
Subordinated Debentures will be redeemable, at the Company's option, in whole
or in part, on or after February 15, 2002 at a redemption price of 106.5% that
declines annually to 100% in 2005, in each case together with accrued and
unpaid interest to the redemption date.
9. NONRECURRING CHARGES INCLUDING RESTRUCTURING CHARGES
Nonrecurring charges of $20,642,000 in 1997 include deferred costs written-
off of $5,013,000 and restructuring costs of $15,629,000. The deferred costs
written-off relate to the Company's unsuccessful bid for United Kingdom
digital terrestrial television multiplex licenses. Restructuring costs relate
to the Company's announcement in September 1997 of a reorganization of certain
of its operations. The Company is consolidating the Customer Operations
departments that serve its three franchise areas in England into one
department, and is consolidating certain operations and management groups
within the Broadcast Services division, as well as certain other
consolidations or cessations of activities. This charge consisted of employee
severance and related costs of $6,726,000 for approximately 280 employees to
be terminated, lease exit costs of $6,539,000 and penalties of $2,364,000
associated with the cancellation of contractual obligations. As of December
31, 1997, $5,441,000 of the provision has been used.
10. OTHER GAINS
Other gains of $21,497,000 in 1997 include a legal settlement of $10,000,000
and a gain on the sale of fixed assets of $11,497,000. In October 1997,
following the U.S. District Court's decision to dismiss the Company's
complaint against LeGroupe Videotron Ltee and its subsidiary, the Company
entered into a Settlement Agreement dismissing the Company's complaint in
exchange for a payment of $10,000,000. In December 1997, a U.S. subsidiary of
the Company sold its fixed and other assets utilized in its microwave
transmission service business and recognized a gain of $11,497,000.
11. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------
1997 1996 1995
------------ ---------- -----------
<S> <C> <C> <C>
Current:
Federal.............................. $ -- $ -- $ (181,000)
State and local...................... 1,261,000 344,000 167,000
Foreign.............................. -- 2,246,000 (2,463,000)
------------ ---------- -----------
Total current...................... 1,261,000 2,590,000 (2,477,000)
------------ ---------- -----------
Deferred:
Federal.............................. -- -- --
State and local...................... -- -- --
Foreign.............................. (16,852,000) 5,063,000 --
------------ ---------- -----------
Total deferred..................... (16,852,000) 5,063,000 --
------------ ---------- -----------
$(15,591,000) $7,653,000 $(2,477,000)
============ ========== ===========
</TABLE>
F-17
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
Deferred tax liabilities:
Fixed assets................................ $ 68,380,000 $ 78,433,000
Depreciation and amortization............... -- 30,623,000
Other....................................... 4,894,000 6,018,000
------------- -------------
Total deferred tax liabilities............ 73,274,000 115,074,000
Deferred tax assets:
Net operating losses........................ 107,208,000 99,227,000
Net deferred interest expense............... 94,689,000 51,770,000
Depreciation and amortization............... 16,935,000 --
Other....................................... 18,164,000 10,396,000
------------- -------------
Total deferred tax assets................. 236,996,000 161,393,000
Valuation allowance for deferred tax assets... (233,940,000) (141,250,000)
------------- -------------
Net deferred tax assets....................... 3,056,000 20,143,000
------------- -------------
Net deferred tax liabilities.................. $ 70,218,000 $ 94,931,000
============= =============
</TABLE>
At December 31, 1997, the Company had net operating loss carryforwards of
approximately $56,000,000 for U.S. federal income tax purposes that expire as
follows: $500,000 in 2008, $1,100,000 in 2009, $21,000,000 in 2010,
$27,700,000 in 2011 and $5,700,000 in 2012. The Company also has United
Kingdom net operating loss carryforwards of approximately $290,000,000 which
have no expiration date. Pursuant to United Kingdom law, these losses are only
available to offset income of the separate entity that generated the loss.
The reconciliation of income taxes computed at U.S. federal statutory rates
to income tax expense is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Provision (benefit) at federal
statutory rate (35%)........... $(120,452,000) $(90,518,000) $(35,083,000)
Add (deduct):
State and local income tax,
net of federal benefit....... 820,000 224,000 109,000
Foreign losses with no
benefit...................... 59,804,000 44,610,000 6,699,000
Amortization of goodwill and
license acquisition costs.... 3,925,000 4,031,000 3,696,000
U.S. losses with no benefit... 40,312,000 49,184,000 22,507,000
Other......................... -- 122,000 (405,000)
------------- ------------ ------------
$ (15,591,000) $ 7,653,000 $ (2,477,000)
============= ============ ============
</TABLE>
F-18
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the consolidated
balance sheets approximate fair value.
Long-term debt: The fair values of the 10 7/8% Notes, the 12 3/4% Notes, the
11 1/2% Notes, the 10% Notes, the 7 1/4% Convertible Notes and the 7%
Convertible Notes are based on the quoted market price. The fair value of the
Term Loan and Revolving Facility is estimated using discounted cash flow
analysis, based on the Company's incremental borrowing rate for similar types
of borrowing arrangements.
Redeemable Preferred Stock: The fair value is based on the quoted market
price.
The carrying amounts and fair values of the Company's financial instruments
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------------- -------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents.... $98,902,000 $98,902,000 $445,884,000 $445,884,000
Long-term debt:
10 7/8% Notes.............. 194,959,000 199,810,000 175,368,000 179,140,000
12 3/4% Notes.............. 209,387,000 230,577,000 185,043,000 202,797,000
11 1/2% Notes.............. 743,961,000 819,000,000 665,257,000 714,000,000
10% Notes.................. 400,000,000 422,000,000 -- --
7 1/4% Convertible Notes... 191,750,000 212,843,000 191,750,000 206,611,000
7% Convertible Notes....... 275,000,000 264,688,000 275,000,000 251,625,000
Term Loan and Revolving
Facility.................. -- -- 239,750,000 239,750,000
Redeemable Preferred
Stock..................... 108,534,000 121,846,000 -- --
</TABLE>
13. RELATED PARTY TRANSACTIONS
On July 25, 1990, Cellular Communications, Inc. ("CCI") and AirTouch
Communications, Inc. ("AirTouch") entered into a Merger and Joint Venture
Agreement, as amended as of December 14, 1990. In connection with this
agreement, on July 31, 1991, CCI distributed to its shareholders the stock of
the Company.
Through August 1996, CCI provided management, financial and legal services
to the Company. Amounts charged to the Company included direct costs where
identifiable, and indirect costs allocated utilizing direct labor hours as
reported by the common officers and employees of CCI and the Company. For the
years ended December 31, 1996 and 1995, CCI charged $1,194,000, and
$1,644,000, respectively, which is included in corporate expenses. In August
1996, upon the merger of CCI with AirTouch, the Company commenced providing
management, financial, legal and technical services to Cellular Communications
International, Inc. ("CCII") and CoreComm Incorporated ("CoreComm"). In 1996,
the Company charged CCII and CoreComm $351,000 and $200,000, respectively,
which included direct costs where identifiable and allocated corporate
overhead based upon the amount of time incurred on CCII and CoreComm business
by the common officers and employees of the Company, CCII and CoreComm. These
charges reduced corporate expenses in 1996.
In January 1997, the Company, CoreComm and CCII agreed to a change in the
Company's fee for the provision of services. In 1997, the Company charged
CoreComm and CCII $1,492,000 and $871,000, respectively, for direct costs
where identifiable and a fixed percentage of its corporate overhead. These
charges
F-19
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
reduced corporate expenses. In the opinion of management of the Company, the
allocation methods are reasonable.
As of December 31, 1997 and 1996, the Company had receivables of $69,000 and
$586,000 from CCII and $71,000 and $102,000 from CoreComm, respectively.
In 1993, the Company entered into a consulting agreement with Insight
Communications Company, L.P. ("Insight U.S."), under which Insight U.S.
provided advice and assistance to the Company with respect to its cable
television, telephone and telecommunications operations in the United Kingdom.
Two members of the Company's Board of Directors are partners in Insight U.S.
Pursuant to the consulting agreement, which had a term of three years, the
Company paid Insight U.S. a fee of $50,000 per month for the first year,
$40,000 per month for the second year and $30,000 per month for the third
year. The fees for the years ended December 31, 1996 and 1995 of $270,000 and
$450,000, respectively, are included in corporate expenses.
14. NET LOSS PER COMMON SHARE
The following table sets forth the computation of basic and diluted net loss
per share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Numerator:
Loss before extraordinary
item........................ $(328,557,000) $(254,454,000) $(90,785,000)
Preferred stock dividend..... (11,978,000) -- --
------------- ------------- ------------
(340,535,000) (254,454,000) (90,785,000)
Extraordinary item............. (4,500,000) -- --
------------- ------------- ------------
Loss available to common
shareholders.................. $(345,035,000) $(254,454,000) $(90,785,000)
Denominator for basic net loss
per common share.............. 32,117,000 31,041,000 30,190,000
Effect of dilutive
securities.................. -- -- --
------------- ------------- ------------
Denominator for diluted net
loss per common share......... 32,117,000 31,041,000 30,190,000
------------- ------------- ------------
Basic and diluted net loss per
common share:
Loss before extraordinary
item........................ $ (10.60) $ (8.20) $ (3.01)
Extraordinary item........... (.14) -- --
------------- ------------- ------------
Net (loss)................. $ (10.74) $ (8.20) $ (3.01)
============= ============= ============
</TABLE>
Stock options, warrants and convertible securities are excluded from the
calculation of net loss per common share as their effect would be
antidilutive.
15. SHAREHOLDERS' EQUITY (DEFICIENCY)
Stock Split
On July 25, 1995, the Company declared a 4-for-3 stock split by way of stock
dividend, which was paid on August 11, 1995. All common stock data in the
Consolidated Financial Statements give effect to the stock split.
Series Preferred Stock
In October 1996, the Board of Directors created and authorized for issuance
2,000 shares of 5% Non-Voting Convertible Preferred Stock, Series A ("Series A
Preferred Stock"), of which 780 shares were issued in
F-20
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
connection with the CableTel Newport acquisition. Each share of Series A
Preferred Stock has a stated value of $100,000, subject to certain exceptions.
The holders of Series A Preferred Stock are entitled to receive cumulative
dividends beginning in October 2001 at the rate of 5% of the stated value,
payable semi-annually in arrears, subject to certain exceptions. Dividends may
be paid, in the sole discretion of the Board of Directors, in cash, in common
stock or in additional shares of Series A Preferred Stock. The Company has the
right, exercisable at any time, to redeem all or some of the Series A
Preferred Stock at a price equal to the aggregate stated value of the shares
to be redeemed, together with all accrued and unpaid dividends, in cash or in
shares of common stock (based on the average market price of the common stock,
as defined). The holder of Series A Preferred Stock has the right to convert
shares of Series A Preferred Stock into common stock equal to the aggregate
stated value of Series A Preferred Stock divided by the greater of (a) $40.00
or (b) the average market price of the common stock, as defined. The Series A
Preferred Stock has a liquidation preference equal to the stated value per
share plus accrued and unpaid dividends.
Warrants
In 1993, the Company issued warrants to purchase an aggregate of
approximately 899,000 shares of common stock at an initial exercise price of
$8.35 per share in connection with certain noncompetition agreements. The
exercise price decreased to $6.96 per share in the second year after the grant
and to $5.57 per share thereafter. The warrants were valued at $13,193,000,
the difference between the fair market value of the common stock on the date
of grant and $5.57 per share. The warrants expire in 2000.
In 1996, pursuant to the terms of the consent solicitations to the holders
of the 10 7/8% Notes and to the holders of the 12 3/4% Notes to gain consent
to modify certain indenture provisions, the Company paid an aggregate of
$3,592,000 in consent payments and issued warrants to purchase 164,000 shares
of common stock at an exercise price of $23.78 per share in lieu of additional
consent payments of $1,641,000. The warrants expire in 2006.
Shareholder Rights Plan
The Rights Agreement provides that one Right will be issued with each share
of common stock issued on or after October 13, 1993. The Rights are
exercisable upon the occurrence of certain potential takeover events and will
expire in October 2003 unless previously redeemed by the Company. When
exercisable, each Right entitles the owner to purchase from the Company one
one-hundredth of a share of Series A Junior Participating Preferred Stock
("Rights Preferred Stock") at a purchase price of $100.
The Rights Preferred Stock will be entitled to a minimum preferential
quarterly dividend payment of $.01 per share and will be entitled to an
aggregate dividend of 100 times the dividend, if any, declared per share of
common stock. In the event of liquidation, the holders of Rights Preferred
Stock will be entitled to a minimum preferential liquidation payment of $1 per
share and will be entitled to an aggregate payment of 100 times the payment
made per share of common stock. Each share of Rights Preferred Stock will have
100 votes and will vote together with the common stock. In the event of any
merger, consolidation or other transaction in which shares of common stock are
changed or exchanged, each share of Rights Preferred Stock will be entitled to
receive 100 times the amount received per share of common stock. These rights
are protected by customary antidilution provisions.
There are 2,500,000 authorized shares of Series Preferred Stock of which
1,000,000 shares are designated Rights Preferred Stock.
F-21
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock Options
There are 2,164,000 shares of common stock reserved for issuance under the
OCOM Corporation (a wholly-owned subsidiary of the Company) 1991 Stock Option
Plan. The plan provides that incentive stock options ("ISOs") be granted at
the fair market value of OCOM's common stock on the date of grant, and
nonqualified stock options ("NQSOs") be granted at not less than 85% of the
fair market value of OCOM's common stock on the date of grant. Options are
exercisable as to 20% of the shares subject thereto on the date of grant and
become exercisable as to an additional 20% of the shares subject thereto on
each January 1 thereafter, while the optionee remains an employee of the
Company. Options will expire ten years after the date of the grant.
There are 6,653,000 shares of common stock reserved for issuance under the
NTL Incorporated 1993 Stock Option Plan. The exercise price of an ISO may not
be less than 100% of the fair market value of the Company's common stock on
the date of grant, and the exercise price of a NQSO may not be less than 85%
of the fair market value of the Company's common stock on the date of grant.
Options are exercisable as to 20% of the shares subject thereto on the date of
grant and become exercisable as to an additional 20% of the shares subject
thereto on each January 1 thereafter, while the optionee remains an employee
of the Company. Options will expire ten years after the date of the grant.
There are 100,000 shares of common stock reserved for issuance under the
OCOM Corporation Non-Employee Director Stock Option Plan. The plan provides
that all options be granted at the fair market value of OCOM's common stock on
the date of grant, and options will expire ten years after the date of the
grant. Options are exercisable as to 20% of the shares subject thereto on the
date of grant and become exercisable as to an additional 20% of the shares
subject thereto on each subsequent anniversary of the grant date, while the
optionee remains a director of the Company. Options will expire ten years
after the date of the grant.
There are 320,000 shares of common stock reserved for issuance under the NTL
Incorporated 1993 Non-Employee Director Stock Option Plan. Under the terms of
this plan, options will be granted to members of the Board of Directors who
are not employees of the Company or any of its affiliates. The plan provides
that all options be granted at the fair market value of the Company's common
stock on the date of grant, and options will expire ten years after the date
of the grant. Options are exercisable as to 20% of the shares subject thereto
on the date of grant and become exercisable as to an additional 20% of the
shares subject thereto on each subsequent anniversary of the grant date while
the optionee remains a director of the Company. Options will expire ten years
after the date of the grant.
Pro forma information regarding net loss and net loss per share is required
by SFAS No. 123, and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that Statement. The
fair value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for 1997, 1996 and 1995: risk-free interest rates of 5.89%, 6.56%
and 6.61%, respectively, dividend yield of 0%, volatility factor of the
expected market price of the Company's common stock of .276, .255 and .255,
respectively, and a weighted-average expected life of the option of 10 years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its stock options.
F-22
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Following is
the Company's pro forma information:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Pro forma net (loss)........... $(343,850,000) $(261,245,000) $(93,688,000)
Basic and diluted pro forma net
(loss) per share.............. $ (11.08) $ (8.42) $ (3.10)
</TABLE>
A summary of the Company's stock option activity and related information for
the years ended December 31, follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- -------------------- --------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning of
year................... 6,738,000 $14.10 5,934,000 $11.04 4,795,000 $ 8.09
Granted................. 1,571,000 23.97 1,390,000 25.94 1,164,000 23.07
Exercised............... (119,000) 12.85 (396,000) 3.44 (21,000) 4.78
Forfeited............... (33,000) 23.78 (190,000) 27.39 (4,000) 17.50
--------- --------- ---------
Outstanding-end of
year................... 8,157,000 $15.98 6,738,000 $14.10 5,934,000 $11.04
========= ========= =========
Exercisable at end of
year................... 5,663,000 $12.39 4,258,000 $10.71 3,410,000 $ 8.22
========= ========= =========
</TABLE>
Weighted-average fair value of options, calculated using the Black-Scholes
option pricing model, granted during 1997, 1996 and 1995 is $12.74, $13.98 and
$12.47, respectively.
The following table summarizes the status of the stock options outstanding
and exercisable at December 31, 1997:
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE
------------------------------- --------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE
RANGE OF EXERCISE PRICES OPTIONS LIFE PRICE OPTIONS PRICE
------------------------ --------- ----------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
$0.19 to $0.56.......... 77,000 3.6 Years $ 0.245 77,000 $ 0.245
$0.73 to $1.12.......... 150,000 3.6 Years $ 0.745 150,000 $ 0.745
$1.53 to $2.69.......... 356,000 3.6 Years $ 2.157 356,000 $ 2.157
$3.09 to $4.50.......... 75,000 4.4 Years $ 3.230 75,000 $ 3.230
$8.81 to $14.63......... 3,312,000 5.4 Years $ 8.873 3,305,000 $ 8.861
$15.19 to $22.88........ 1,498,000 7.4 Years $21.685 882,000 $21.659
$23.06 to $32.38........ 2,689,000 8.9 Years $25.038 818,000 $25.213
--------- -------------
Total................. 8,157,000 5,663,000
========= =============
</TABLE>
The Company has 25,309,000 shares of its common stock reserved for issuance
upon the exercise of warrants and stock options and the conversion of debt and
preferred stock.
16. EMPLOYEE BENEFIT PLANS
Certain subsidiaries of NTL Group Limited operate a defined benefit pension
plan in the United Kingdom. The assets of the Plan are held separately from
those of NTL Group Limited and are invested in specialized
F-23
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
portfolios under the management of an investment group. The pension cost is
calculated using the attained age method. The Company's policy is to fund
amounts to the defined benefit plan necessary to comply with the funding
requirements as prescribed by the laws and regulations in the United Kingdom.
The change in the projected benefit obligation in 1997 is due to the change in
actuarial assumptions used.
The components of net pension costs are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Service cost..................................... $ 10,693,000 $ 7,997,000
Interest cost.................................... 12,765,000 11,679,000
Actual return on plan assets..................... (30,852,000) (16,103,000)
Net amortization and deferral.................... 17,327,000 4,241,000
------------ ------------
$ 9,933,000 $ 7,814,000
============ ============
</TABLE>
The funded status (assets exceed accumulated benefits) of the plan is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Accumulated benefit obligation:
Vested....................................... $178,828,000 $148,809,000
Nonvested.................................... -- --
------------ ------------
$178,828,000 $148,809,000
============ ============
Fair value of plan assets, principally U.K.
equity securities............................. $195,226,000 $166,195,000
Projected benefit obligation................... 204,340,000 170,795,000
------------ ------------
Excess of projected benefit obligation over
assets...................................... (9,114,000) (4,600,000)
Unrecognized net transition obligation......... 10,203,000 11,541,000
Unrecognized net gain.......................... (1,065,000) (5,098,000)
------------ ------------
Prepaid pension cost......................... $ 24,000 $ 1,843,000
============ ============
Actuarial assumptions:
Weighted average discount rate............... 7.25% 8.25%
Weighted average rate of compensation
increase.................................... 8.00% 8.00%
Expected long-term rate of return on plan
assets...................................... 9.00% 9.50%
</TABLE>
17. LEASES
Leases for buildings, office space and equipment extend through 2031. Total
rental expense for the years ended December 31, 1997, 1996 and 1995 under
operating leases was $20,674,000, $14,886,000 and $2,607,000, respectively.
F-24
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments under noncancellable operating leases as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31:
-----------------------
<S> <C>
1998...................................... $ 21,169,000
1999...................................... 20,933,000
2000...................................... 20,572,000
2001...................................... 20,235,000
2002...................................... 16,352,000
Thereafter................................ 82,420,000
------------
$181,681,000
============
</TABLE>
18. COMMITMENTS AND CONTINGENT LIABILITIES
As of December 31, 1997, the Company was committed to pay approximately
$78,000,000 for equipment and services.
The Company has licenses issued by the United Kingdom Department of Trade
and Industry ("DTI") and the United Kingdom Independent Television Commission
("ITC") for its cable television, telephone and telecommunications business.
The initial terms of the Company's licenses was 23 years for the DTI licenses
and 15 years for the ITC licenses. The Company's licenses expire in 2008 to
2016 for the DTI licenses and 1999 to 2005 for the ITC licenses. The DTI
requires a fixed annual renewal fee of (Pounds)2,500 ($4,200) per license. The
ITC requires an annual license fee ranging from (Pounds)1,300 ($2,200) to
(Pounds)7,900 ($13,100) per license based on the number of homes in the
licensed area, which is subject to adjustment annually. The Company's license
fees in 1997 were $316,000.
In addition, the Company was awarded certain newly issued licenses by the
ITC in 1995. Pursuant to the terms of the local delivery license ("LDL") for
Northern Ireland granted to a wholly-owned subsidiary of the Company, the
Company is required to make annual cash payments to the ITC for fifteen years
commencing in January 1997 in the amount of approximately (Pounds)14,400,000
($23,800,000) (subject to adjustments for inflation). Such payments are in
addition to the percentages of qualifying revenue already set by the ITC of 0%
for the first ten years and 2% for the last five years of the fifteen year
license. The Company paid $23,587,000 in 1997.
Pursuant to the terms of the LDL for Glamorgan and Gwent, Wales granted to a
wholly-owned subsidiary of the Company, the Company is required to make annual
cash payments to the ITC for fifteen years, commencing in the first full
calendar year after the start of operations, in the amount of (Pounds)104,188
($172,000). Such payments are in addition to the percentages of qualifying
revenue already set by the ITC of 0% for the first five years, 2% for the
second five years and 4% for the last five years of the fifteen-year license.
A significant portion of NTL Group Limited's revenues is attributable to the
provision of television and radio transmission and distribution services and
the provision of telecommunications services. In the United Kingdom, the
provision of such services is governed by the Telecommunications Act and The
Wireless Telegraphy Act 1949. NTL Group Limited holds five licenses under the
Telecommunications Act. The initial terms of these licenses were 10 or 25
years. These licenses expire in 2002 to 2021. NTL Group Limited holds a number
of Wireless Telegraphy Act licenses which continue in force primarily from
year to year unless revoked or unless any of the license fees are not paid.
The Company paid $3,447,000 in 1997 in connection with these licenses.
F-25
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is involved in, or has been involved in, certain disputes and
litigation arising in the ordinary course of its business, including claims
involving contractual disputes and claims for damages to property and personal
injury resulting from the construction of the Company's networks and the
maintenance and servicing of the Company's transmission masts. None of these
matters are expected to have a material adverse effect on the Company's
financial position, results of operations or cash flows.
19. INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
The Company operates its long distance telephone and microwave transmission
business in the United States and its television and radio broadcasting, cable
television, telephone and telecommunications businesses in the United Kingdom.
The Company acquired its national and international telecom segment and its
broadcast transmission and other segment in 1996. Identifiable corporate
assets consist primarily of cash and cash equivalents. The industry segments
and geographic area information as of and for the years ended December 31,
1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
LONG
DISTANCE
TELEPHONE LOCAL NATIONAL BROADCAST
AND TELECOM AND TRANSMISSION
MICROWAVE AND INTERNATIONAL AND
TRANSMISSION TELEVISION TELECOM OTHER CORPORATE CONSOLIDATED
------------ ---------- ------------- ------------ --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31,
1997
Total revenues........ $ 8,831 $ 189,407 $162,738 $130,799 $ -- $ 491,775
Operating income
(loss)............... (1,207) (208,815) (5,327) 42,652 (19,367) (192,064)
Depreciation and
amortization......... 2,368 103,704 17,454 20,328 6,655 150,509
Identifiable assets... 27,623 1,579,044 350,704 358,302 105,966 2,421,639
Fixed asset
additions............ 1,541 333,037 101,088 38,984 156 474,806
Year ended December 31,
1996
Total revenues........ $10,086 $ 89,209 $ 45,430 $ 83,618 $ -- $ 228,343
Operating income
(loss)............... 773 (164,108) (7,774) 26,376 (12,900) (157,633)
Depreciation and
amortization......... 2,744 69,200 8,601 13,152 4,956 98,653
Identifiable assets... 15,660 1,655,759 220,764 412,989 149,439 2,454,611
Fixed asset
additions............ 552 478,761 38,812 26,056 1,894 546,075
Year ended December 31,
1995
Total revenues........ $ 8,937 $ 24,804 $ -- $ -- $ -- $ 33,741
Operating (loss)...... (4,531) (76,161) -- -- (12,434) (93,126)
Depreciation and
amortization......... 2,729 25,650 -- -- 1,444 29,823
Identifiable assets... 15,774 892,935 -- -- 101,960 1,010,669
Fixed asset
additions............ 1,557 473,795 -- -- -- 475,352
</TABLE>
20. SUBSEQUENT EVENT
In February 1998, the Company entered into an agreement and plan of
amalgamation (the "Agreement") with Comcast UK Cable Partners Limited
("Partners"). Under the Agreement, Partners' shareholders will receive 0.3745
shares of the Company's Common Stock for each share of Partners Common Stock.
Based on the closing price of the Company's Common Stock on the date of the
Agreement, the transaction is valued at approximately $600,000,000. The
Agreement contains provisions such that if the purchase price per Partners
F-26
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
share falls below $10.00, Partners has the right to terminate the transaction,
subject to the Company's right to adjust the exchange ratio such that
Partners' shareholders would receive $10.00 for each Partners share. Under
certain circumstances, the consideration payable to Partners' shareholders may
be adjusted based on the proceeds of the potential exercise of certain rights
of first refusal with respect to Partners' interests in the London and
Birmingham franchises. Completion of the transaction is subject to a number of
closing conditions including regulatory approvals, shareholder approvals and
consents from the holders of the Company's and Partners' debt.
F-27
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1998
--------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... $1,169,699,000
Marketable securities....................................... 83,591,000
Accounts receivable--trade, less allowance for doubtful
accounts of $9,940,000..................................... 79,093,000
Other....................................................... 51,209,000
--------------
Total current assets...................................... 1,383,592,000
FIXED ASSETS, net............................................. 1,853,181,000
INTANGIBLE ASSETS, net........................................ 359,251,000
OTHER ASSETS, net of accumulated amortization of $28,897,000.. 98,927,000
--------------
Total assets.............................................. $3,694,951,000
==============
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable............................................ $ 68,296,000
Accrued expenses and other.................................. 145,661,000
Interest payable............................................ 17,758,000
Accrued construction costs.................................. 27,764,000
Deferred revenue............................................ 33,457,000
--------------
Total current liabilities................................. 292,936,000
LONG-TERM DEBT................................................ 3,357,217,000
OTHER......................................................... 430,000
COMMITMENTS AND CONTINGENT LIABILITIES
DEFERRED INCOME TAXES......................................... 70,907,000
SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK, $.01 par
value, plus accreted dividends; liquidation preference
$107,000,000; less unamortized discount of $3,366,000; issued
and outstanding 114,000 shares............................... 112,250,000
SHAREHOLDERS' (DEFICIENCY)
Series preferred stock--$.01 par value; authorized 2,500,000
shares; liquidation preference $78,000,000; issued and
outstanding 780 shares..................................... --
Common stock--$.01 par value; authorized 100,000,000 shares;
issued and outstanding 32,302,000 shares................... 323,000
Additional paid-in capital.................................. 536,279,000
Accumulated other comprehensive income...................... 135,333,000
(Deficit)................................................... (810,724,000)
--------------
(138,789,000)
--------------
Total liabilities and shareholders' (deficiency).......... $3,694,951,000
==============
</TABLE>
See accompanying notes.
F-28
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
REVENUES
Local telecommunications and television........... $ 61,584,000 $ 31,880,000
National and international telecommunications..... 51,012,000 40,585,000
Broadcast transmission and other.................. 33,418,000 32,113,000
Other telecommunications.......................... 1,778,000 2,239,000
------------ ------------
147,792,000 106,817,000
COSTS AND EXPENSES
Operating expenses................................ 77,333,000 70,756,000
Selling, general and administrative expenses...... 56,728,000 38,317,000
Franchise fees.................................... 6,195,000 5,872,000
Corporate expenses................................ 3,642,000 4,098,000
Depreciation and amortization..................... 45,856,000 33,005,000
------------ ------------
189,754,000 152,048,000
------------ ------------
OPERATING (LOSS).................................... (41,962,000) (45,231,000)
OTHER INCOME (EXPENSE)
Interest and other income......................... 5,143,000 7,401,000
Interest expense.................................. (58,058,000) (47,609,000)
Foreign currency transaction gains (losses)....... 1,205,000 (322,000)
------------ ------------
NET (LOSS).......................................... $(93,672,000) $(85,761,000)
============ ============
BASIC AND DILUTED NET (LOSS) PER COMMON SHARE....... $ (3.02) $ (2.73)
============ ============
</TABLE>
See accompanying notes.
F-29
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIENCY)
(UNAUDITED)
<TABLE>
<CAPTION>
SERIES COMMON STOCK-- ACCUMULATED
PREFERRED STOCK $.01 PAR VALUE ADDITIONAL OTHER
----------------- ------------------- PAID-IN COMPREHENSIVE COMPREHENSIVE
SHARES PAR SHARES PAR CAPITAL INCOME INCOME (DEFICIT)
----------------- ---------- -------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1997................... 780 $ -- 32,210,000 $322,000 $538,054,000 $117,008,000 $(717,052,000)
Exercise of stock
options............... 84,000 1,000 1,800,000
Exercise of warrants... 8,000 141,000
Accreted dividends on
senior redeemable
exchangeable preferred
stock................. (3,638,000)
Accretion of discount
on senior redeemable
exchangeable preferred
stock................. (78,000)
Comprehensive income...
Net loss for the three
months ended March 31,
1998.................. $(93,672,000) (93,672,000)
Currency translation
adjustment............ 18,325,000 18,325,000
------------
Total.................. $(75,347,000)
------ -------- ---------- -------- ------------ ============ ------------ -------------
BALANCE, MARCH 31,
1998................... 780 $ -- 32,302,000 $323,000 $536,279,000 $135,333,000 $(810,724,000)
====== ======== ========== ======== ============ ============ =============
</TABLE>
See accompanying notes.
F-30
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1998 1997
-------------- -------------
<S> <C> <C>
Net cash (used in) operating activities......... $ (16,605,000) $ (13,435,000)
INVESTING ACTIVITIES
Purchase of fixed assets...................... (97,945,000) (120,585,000)
Increase in other assets...................... (426,000) (1,299,000)
Purchase of marketable securities............. (78,481,000) (101,234,000)
Proceeds from sales of marketable securities.. -- 20,000,000
-------------- -------------
Net cash (used in) investing activities..... (176,852,000) (203,118,000)
FINANCING ACTIVITIES
Proceeds from borrowings and sale of preferred
stock, net of financing costs................ 1,332,902,000 493,143,000
Principal payments............................ (65,836,000) --
Proceeds from exercise of stock options and
warrants..................................... 1,942,000 448,000
-------------- -------------
Net cash provided by financing activities... 1,269,008,000 493,591,000
Effect of exchange rate changes on cash....... (4,754,000) (16,544,000)
-------------- -------------
Increase in cash and cash equivalents....... 1,070,797,000 260,494,000
Cash and cash equivalents at beginning of
period....................................... 98,902,000 445,884,000
-------------- -------------
Cash and cash equivalents at end of period.. $1,169,699,000 $ 706,378,000
============== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest
exclusive of amounts capitalized............. $ 20,366,000 $ 4,516,000
Income taxes paid............................. 19,000 --
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
ACTIVITIES
Accretion of dividends and discount on senior
redeemable exchangeable preferred stock...... $ 3,716,000 $ 1,697,000
</TABLE>
See accompanying notes.
F-31
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three months
ended March 31, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further information, refer
to the consolidated financial statements and footnotes thereto for the year
ended December 31, 1997 included herein.
In March 1998, the Company issued debt denominated in British pounds
sterling. Interest expense has been translated using the average exchange rate
for the period and the debt balance has been translated using the current
exchange rate at the balance sheet date. Foreign currency gains and losses
arising from exchange rate fluctuations are included in the results of
operations.
The Company has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income".
Certain prior year amounts have been reclassified to conform to the 1998
presentation.
NOTE B--FIXED ASSETS
Fixed assets as of March 31, 1998 consist of:
<TABLE>
<S> <C>
Operating equipment...................................... $1,704,728,000
Other equipment.......................................... 241,168,000
Construction-in-progress................................. 162,715,000
--------------
2,108,611,000
Accumulated depreciation................................. (255,430,000)
--------------
$1,853,181,000
==============
</TABLE>
NOTE C--INTANGIBLE ASSETS
Intangible assets as of March 31, 1998 consist of:
<TABLE>
<S> <C>
License acquisition costs, net of accumulated
amortization of $50,337,000............................. $119,399,000
Goodwill, net of accumulated amortization of
$18,023,000............................................. 239,852,000
------------
$359,251,000
============
</TABLE>
F-32
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE D--LONG-TERM DEBT
Long-term debt as of March 31, 1998 consist of:
<TABLE>
<S> <C>
10 7/8% Senior Deferred Coupon Notes...................... $ 200,142,000
12 3/4% Series A Senior Deferred Coupon Notes............. 215,889,000
11 1/2% Series B Senior Deferred Coupon Notes............. 765,154,000
10% Series B Senior Notes................................. 400,000,000
9 1/2% Senior Sterling Notes, less unamortized discount of
$687,000................................................. 208,275,000
10 3/4% Senior Deferred Coupon Sterling Notes............. 295,318,000
9 3/4% Senior Deferred Coupon Notes....................... 805,689,000
7 1/4% Convertible Subordinated Notes..................... 191,750,000
7% Convertible Subordinated Notes......................... 275,000,000
--------------
$3,357,217,000
==============
</TABLE>
In March 1998, the Company called for redemption all of its $191,750,000
principal amount 7 1/4% Convertible Subordinated Notes due 2005. The
redemption date was April 20, 1998, at a redemption price of 105.08% of the
principal amount plus accrued and unpaid interest through the date of
redemption. The 7 1/4% Notes were convertible into Common Stock at a
conversion price of $27.56 per share. In April 1998, all of the 7 1/4% Notes
were converted into approximately 6,957,500 shares of the Company's Common
Stock.
In March 1998, the Company issued (Pounds)125,000,000 aggregate principal
amount of 9 1/2% Senior Notes due 2008 (the "Sterling Senior Notes"),
(Pounds)300,000,000 aggregate principal amount of 10 3/4% Senior Deferred
Coupon Notes due 2008 (the "Sterling Deferred Coupon Notes") and
$1,300,000,000 aggregate principal amount of 9 3/4% Senior Deferred Coupon
Notes due 2008 (the "Dollar Deferred Coupon Notes") (together the "New
Notes"). The Sterling Senior Notes, Sterling Deferred Coupon Notes and the
Dollar Deferred Coupon Notes were issued at a price to the public of 99.67% or
(Pounds)124,588,000, 58.62% or (Pounds)175,860,000 and 61.724% or
$802,412,000, respectively. The Company received net proceeds of
(Pounds)121,161,000, (Pounds)170,584,000 and $778,340,000, after discounts and
commissions, from the issuance of the Sterling Senior Notes, the Sterling
Deferred Coupon Notes and the Dollar Deferred Coupon Notes, respectively. The
aggregate of the discounts, commissions and other fees incurred of $38,787,000
is included in deferred financing costs.
The original issue discount of the Sterling Deferred Coupon Notes accretes
at a rate of 10 3/4%, compounded semiannually, to an aggregate principal
amount of (Pounds)300,000,000 by April 1, 2003. The original issue discount of
the Dollar Deferred Coupon Notes accretes at a rate of 9 3/4%, compounded
semiannually, to an aggregate principal amount of $1,300,000,000 by April 1,
2003. Interest on each of the Sterling Deferred Coupon Notes and the Dollar
Deferred Coupon Notes will thereafter accrue at 10 3/4% per annum and 9 3/4%
per annum, respectively, payable semiannually, beginning on October 1, 2003.
The Sterling Senior Notes accrue interest at 9 1/2% per annum, payable
semiannually, beginning on October 1, 1998.
The New Notes are effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries, rank pari passu in right of payment with each other and with all
senior unsecured indebtedness of the Company and rank senior in right of
payment to all subordinated indebtedness of the Company.
The New Notes may be redeemed at the Company's option, in whole or in part,
at any time on or after April 1, 2003, at a redemption price of 104 3/4% to
105 3/8% that declines annually to 100% in 2006, in each case together with
accrued and unpaid interest to the date of redemption.
The indentures governing the New Notes contain restrictions relating to,
among other things: (i) incurrence of additional indebtedness and the issuance
of preferred stock, (ii) dividend and other payment restrictions and (iii)
mergers, consolidations and sales of assets.
F-33
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE E--CONVERSION OF SERIES PREFERRED STOCK
In May 1998, the 780 outstanding shares of 5% Non-Voting Convertible
Preferred Stock, Series A were converted into 1,950,000 shares of Common
Stock.
NOTE F--GRANT OF STOCK OPTIONS
In March 1998, options to purchase approximately 7,800,000 shares of Common
Stock were granted to officers, non-employee directors and employees at an
exercise price of $36.50 per share. Officers and senior management employees
were granted options to purchase 3,260,000 shares and 2,765,000 shares,
respectively. These employees will not be granted any further options in 1998
to 2001 inclusive. These options will vest beginning January 1, 1999 through
January 1, 2004. The non-employee directors were granted options to purchase
an aggregate of 450,000 shares which vest on the same schedule. Supervisory
employees were granted options to purchase an aggregate of approximately
1,000,000 shares which are exercisable as to 20% of the shares subject thereto
on the date of grant and an additional 20% each January 1 thereafter, while
the optionee remains an employee of the Company. Finally, each employee who is
not included in the groups described above and who has at least one year of
service as of March 1, 1998 was granted an option to purchase 100 shares which
are exercisable on a 20% per year schedule.
Beginning in 1999 and in each year thereafter, each employee who is not
otherwise granted options and has completed at least one year of employment at
the relevant date will be granted an option to purchase 100 shares of the
Company's Common Stock each year. The exercise price for these options will be
equal to the closing price of the Company's Common Stock on the date of
issuance, and these options will vest on a 20% per year schedule. It is
anticipated that approximately 1,850,000 options will be granted each year in
1999, 2000 and 2001 to supervisory and other employees.
NOTE G--RESTRUCTURING CHARGES
In September 1997, the Company announced a reorganization of certain of its
operations. Restructuring costs of $15,629,000 were recorded in September 1997
consisting of employee severance and related costs of $6,726,000 for
approximately 280 employees to be terminated, lease exit costs of $6,539,000
and penalties of $2,364,000 associated with the cancellation of contractual
obligations. As of March 31, 1998, $6,200,000 of the provision has been used.
NOTE H--NET LOSS PER COMMON SHARE
The following table sets forth the computation of basic and diluted net loss
per common share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Numerator:
Net loss....................................... $(93,672,000) $(85,761,000)
Preferred stock dividend....................... (3,638,000) (1,697,000)
------------ ------------
Loss available to common shareholders.......... $(97,310,000) $(87,458,000)
============ ============
Denominator for basic net loss per common
share......................................... 32,250,000 32,084,000
Effect of dilutive securities.................. -- --
------------ ------------
Denominator for diluted net loss per common
share......................................... 32,250,000 32,084,000
============ ============
Basic and diluted net loss per common share.... $ (3.02) $ (2.73)
============ ============
</TABLE>
F-34
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The shares issuable upon the exercise of stock options and warrants and upon
the conversion of convertible securities are excluded from the calculation of
net loss per common share as their effect would be antidilutive.
NOTE I--COMMITMENTS AND CONTINGENT LIABILITIES
As of March 31, 1998, the Company was committed to pay approximately
$103,300,000 for equipment and services.
The Company has licenses issued by the United Kingdom Department of Trade
and Industry ("DTI") and the United Kingdom Independent Television Commission
("ITC") for its cable television ("CATV"), telephone and telecommunications
business. The initial terms of the Company's licenses was 23 years for the DTI
licenses and 15 years for the ITC licenses. The Company's licenses expire in
2008 to 2016 for the DTI licenses and 1999 to 2005 for the ITC licenses. The
DTI requires a fixed annual renewal fee of (Pounds)2,500 ($4,100) per license.
The ITC requires an annual license fee ranging from (Pounds)1,300 ($2,100) to
(Pounds)7,900 ($13,000) per license based on the number of homes in the
licensed area, which is subject to adjustment annually. The provision of the
Company's transmission and distribution services is governed by the
Telecommunications Act and the Wireless Telegraphy Act 1949. The Company holds
five licenses under the Telecommunications Act. The initial terms of these
licenses were 10 or 25 years. These licenses expire in 2002 to 2021. The
Company holds a number of Wireless Telegraphy Act licenses which continue in
force primarily from year to year unless revoked or unless any of the license
fees are not paid. The Company's license fees paid in the three months ended
March 31, 1998 were $634,000.
In addition, the Company was awarded certain newly issued licenses by the
ITC in 1995. Pursuant to the terms of the local delivery license ("LDL") for
Northern Ireland granted to a wholly-owned subsidiary of the Company, the
Company is required to make annual cash payments to the ITC for fifteen years
commencing in January 1997 in the amount of approximately (Pounds)14,400,000
($24,100,000) (subject to adjustments for inflation). The fee for 1998 is
(Pounds)14,951,661. Such payments are in addition to the percentages of
qualifying revenue already set by the ITC of 0% for the first ten years and 2%
for the last five years of the fifteen year license. The Company paid
$6,152,000 in the three months ended March 31, 1998.
Pursuant to the terms of the LDL for Glamorgan and Gwent, Wales granted to a
wholly-owned subsidiary of the Company, the Company is required to make annual
cash payments to the ITC for fifteen years, commencing in January 1998, in the
amount of (Pounds)104,188 ($174,000). Such payments are in addition to the
percentages of qualifying revenue already set by the ITC of 0% for the first
five years, 2% for the second five years and 4% for the last five years of the
fifteen year license. The Company paid $43,000 in the three months ended March
31, 1998.
The Company is involved in, or has been involved in, certain disputes and
litigation arising in the ordinary course of its business, including claims
involving contractual disputes and claims for damages to property and personal
injury resulting from construction of the Company's networks and the
maintenance and servicing of the Company's transmission masts. None of these
matters are expected to have a material adverse effect on the Company's
financial position, results of operations or cash flows.
NOTE J--PARTNERS ACQUISITION
In February 1998, the Company entered into an agreement and plan of
amalgamation (the "Agreement") with Comcast UK Cable Partners Limited
("Partners"). Under the Agreement, Partners' shareholders will receive 0.3745
shares of the Company's Common Stock for each share of Partners Common Stock.
Based on the closing price of the Company's Common Stock on the date of the
Agreement, the transaction is valued at approximately $600,000,000. The
Agreement contains provisions such that if the purchase price per Partners
F-35
<PAGE>
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
share falls below $10.00, Partners has the right to terminate the transaction,
subject to the Company's right to adjust the exchange ratio such that
Partners' shareholders would receive $10.00 for each Partners share. Under
certain circumstances, the consideration payable to Partners' shareholders may
be adjusted based on the proceeds of the potential exercise by a third party
of certain purchase rights with respect to Partners' interests in the London
and Birmingham franchises. Completion of the transaction is subject to a
number of closing conditions including regulatory approvals, shareholder
approvals and consents from the holders of the Company's and Partners' debt.
F-36
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Comcast UK Cable Partners Limited
We have audited the accompanying consolidated balance sheet of Comcast UK
Cable Partners Limited (a company incorporated in Bermuda) and subsidiaries as
of December 31, 1997 and 1996, and the related consolidated statements of
operations, shareholders' equity and of cash flows for each of the three years
in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Comcast UK Cable Partners
Limited and subsidiaries as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1997 in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
February 27, 1998
F-37
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN (Pounds)000'S, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................. (Pounds) 37,372 (Pounds) 63,314
Short-term investments..................... 61,466
Accounts receivable, less allowance for
doubtful accounts of (Pounds)2,598 and
(Pounds)1,338............................. 4,255 2,922
Other current assets....................... 5,419 5,359
--------------- ---------------
Total current assets..................... 47,046 133,061
--------------- ---------------
INVESTMENTS IN AFFILIATES.................... 61,363 69,472
--------------- ---------------
PROPERTY AND EQUIPMENT....................... 315,702 232,112
Accumulated depreciation................... (33,000) (13,765)
--------------- ---------------
Property and equipment, net................ 282,702 218,347
--------------- ---------------
DEFERRED CHARGES............................. 60,770 60,867
Accumulated amortization................... (13,985) (8,379)
--------------- ---------------
Deferred charges, net...................... 46,785 52,488
--------------- ---------------
FOREIGN EXCHANGE PUT OPTIONS AND OTHER, net.. 7,958 11,002
--------------- ---------------
(Pounds)445,854 (Pounds)484,370
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses...... (Pounds) 23,605 (Pounds) 23,086
Current portion of long-term debt.......... 1,683 1,463
Foreign exchange call options.............. 4,086
Due to affiliates.......................... 920 676
--------------- ---------------
Total current liabilities................ 26,208 29,311
--------------- ---------------
LONG-TERM DEBT, less current portion......... 234,010 202,626
--------------- ---------------
FOREIGN EXCHANGE CALL OPTIONS................ 2,688 3,079
--------------- ---------------
LONG-TERM DEBT, due to shareholder........... 11,272 10,322
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred shares, (Pounds).01 par value--
authorized, 10,000,000 shares; issued
none......................................
Class A common shares, (Pounds).01 par val-
ue--authorized, 50,000,000 shares; issued,
37,231,997................................ 372 372
Class B common shares, (Pounds).01 par val-
ue--authorized, 50,000,000 shares; issued,
12,872,605................................ 129 129
Additional capital......................... 358,548 358,548
Accumulated deficit........................ (187,373) (120,017)
--------------- ---------------
Total shareholders' equity............... 171,676 239,032
--------------- ---------------
(Pounds)445,854 (Pounds)484,370
=============== ===============
</TABLE>
See notes to consolidated financial statements.
F-38
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(AMOUNTS IN (Pounds)000'S, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES
Service income........... (Pounds) 55,603 (Pounds) 31,358 (Pounds) 1,530
Consulting fee income.... 1,059 1,070 1,313
--------------- --------------- ---------------
56,662 32,428 2,843
--------------- --------------- ---------------
COSTS AND EXPENSES
Operating................ 19,624 12,211 683
Selling, general and
administrative.......... 30,850 25,073 7,815
Management fees.......... 3,204 2,997 3,105
Depreciation and
amortization............ 25,588 16,700 3,049
--------------- --------------- ---------------
79,266 56,981 14,652
--------------- --------------- ---------------
OPERATING LOSS............. (22,604) (24,553) (11,809)
OTHER (INCOME) EXPENSE
Interest expense......... 25,243 23,627 3,539
Investment income........ (7,259) (12,555) (11,758)
Equity in net losses of
affiliates.............. 21,359 18,432 23,677
Exchange losses (gains)
and other............... 5,409 (13,482) 1,695
--------------- --------------- ---------------
44,752 16,022 17,153
--------------- --------------- ---------------
NET LOSS................... (Pounds)(67,356) (Pounds)(40,575) (Pounds)(28,962)
=============== =============== ===============
NET LOSS PER SHARE......... (Pounds) (1.34) (Pounds) (.84) (Pounds) (.70)
=============== =============== ===============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING............... 50,105 48,216 41,245
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
F-39
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN (Pounds)000'S)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................... (Pounds)(67,356) (Pounds)(40,575) (Pounds)(28,962)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation and
amortization............. 25,588 16,700 3,049
Amortization on foreign
exchange contracts....... 2,770 2,752 (75)
Non-cash interest
expense.................. 24,684 23,209 3,539
Non-cash investment
income................... (2,521) (2,854) (5,016)
Exchange losses (gains)... 2,852 (18,857) 944
Equity in net losses of
affiliates............... 21,359 18,432 23,677
Other..................... 991 (199) 619
--------------- --------------- ---------------
8,367 (1,392) (2,225)
Increase in accounts
receivable, other current
assets and other......... (3,447) (1,154) (2,658)
Increase in accounts
payable and accrued
expenses................. 519 1,045 10,002
Increase (decrease) in due
to affiliates............ 244 (1,548) (4,628)
--------------- --------------- ---------------
Net cash provided by
(used in) operating
activities............. 5,683 (3,049) 491
--------------- --------------- ---------------
FINANCING ACTIVITIES
Proceeds from borrowings.. 192,542
Repayments of debt........ (1,633) (1,711)
Debt acquisition costs.... (6,089)
Purchase of foreign
exchange put options..... (13,855)
Proceeds from sales of
foreign exchange call
options.................. 2,125 3,415
Other..................... (53)
--------------- --------------- ---------------
Net cash (used in)
provided by financing
activities............. (1,633) 414 175,960
--------------- --------------- ---------------
INVESTING ACTIVITIES
Acquisition, net of cash
acquired................. (10,373)
Proceeds from sales
(purchases) of short-term
investments, net......... 61,466 (4,226) (43,141)
Capital contributions and
loans to affiliates...... (8,713) (10,667) (25,829)
Capital expenditures...... (82,125) (70,624) (45,308)
Additions to deferred
charges.................. (620) (392) (59)
--------------- --------------- ---------------
Net cash used in
investing activities... (29,992) (96,282) (114,337)
--------------- --------------- ---------------
(DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS....... (25,942) (98,917) 62,114
CASH AND CASH EQUIVALENTS,
beginning of year.......... 63,314 162,231 100,117
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS,
end of year................ (Pounds) 37,372 (Pounds) 63,314 (Pounds)162,231
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
F-40
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
A COMMON B COMMON
------------------ ------------------ ADDITIONAL ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ----------- ------ ----------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1995................... 28,372 (Pounds)284 12,873 (Pounds)129 (Pounds)287,450 (Pounds) (50,480) (Pounds)237,383
Net loss.............. (28,962) (28,962)
Other................. (53) (53)
------ ----------- ------ ----------- --------------- ---------------- ---------------
BALANCE, DECEMBER 31,
1995................... 28,372 284 12,873 129 287,397 (79,442) 208,368
Net loss.............. (40,575) (40,575)
Shares issued in
connection with
SingTel Transaction.. 8,860 88 71,151 71,239
------ ----------- ------ ----------- --------------- ---------------- ---------------
BALANCE, DECEMBER 31,
1996................... 37,232 372 12,873 129 358,548 (120,017) 239,032
Net loss.............. (67,356) (67,356)
------ ----------- ------ ----------- --------------- ---------------- ---------------
BALANCE, DECEMBER 31,
1997................... 37,232 (Pounds)372 12,873 (Pounds)129 (Pounds)358,548 (Pounds)(187,373) (Pounds)171,676
====== =========== ====== =========== =============== ================ ===============
</TABLE>
See notes to consolidated financial statements.
F-41
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. BUSINESS
Comcast UK Cable Partners Limited and subsidiaries (the "Company"), a
Bermuda company incorporated in 1992, was formed to develop, construct, manage
and operate the interests of Comcast Corporation ("Comcast") in the United
Kingdom ("UK") cable and telecommunications industry. The Company is a
controlled subsidiary of Comcast U.K. Holdings, Inc. ("Holdings"), a Delaware
corporation indirectly wholly owned by Comcast. As of December 31, 1997, the
Company has interests in four operations (the "Operating Companies"):
Birmingham Cable Corporation Limited ("Birmingham Cable"), in which the
Company owns a 27.5% interest, Cable London PLC ("Cable London"), in which the
Company owns a 50.0% interest, Cambridge Holding Company Limited ("Cambridge
Cable"), in which the Company owns a 100% interest and two companies holding
the franchises for Darlington and Teesside, England ("Teesside"), in which the
Company owns a 100% interest. The Company also owns a 100% interest in Comcast
UK Holdings Limited ("UK Holdings"), a company incorporated in Bermuda in
December 1997.
On February 4, 1998, the Company entered into a definitive agreement to
amalgamate (the "NTL Transaction") with a wholly owned Bermuda subsidiary of
NTL Incorporated ("NTL"). NTL is an alternative telecommunications company in
the UK and is listed on Nasdaq. The NTL Transaction is expected to close in
1998, subject to, among other things, the receipt of required Bermuda and UK
regulatory approvals, the approval of the Company's and NTL's shareholders,
the consent of the Company's and NTL's bondholders, the consent of certain NTL
bank lenders and other customary closing matters. Comcast, through Holdings,
is the sole holder of the multiple-voting Class B Common Shares of the Company
and has agreed to vote for the transaction, assuring its approval by the
Company's shareholders. Upon consummation of the NTL Transaction, the Company
would become a wholly owned subsidiary of NTL.
Except in the circumstances described below, the Company's shareholders will
receive 0.3745 shares of NTL common stock for each of the Company's Class A
Common Shares or Class B Common Shares. If the average closing price of the
NTL common stock for a specified period of time prior to the Company's
shareholders meeting to approve the NTL Transaction (the "Average Price") is
less than $26.70, the Company will have the option to terminate the NTL
Transaction, subject to the right of NTL to adjust the exchange ratio such
that one share of the Company's Class A Common Shares or Class B Common Shares
will be exchanged for a number of shares of NTL common stock equal to $10.00
(based on the Average Price).
Pursuant to existing arrangements between the Company and Telewest
Communications plc ("Telewest"), a co-owner of interests in Cable London and
Birmingham Cable, Telewest has certain rights (the "Telewest Rights") to
acquire either or both of the Company's interests in these systems as a result
of the NTL Transaction. However, as described in the following paragraphs, the
consummation of the NTL Transaction is not dependent on the resolution of the
Telewest Rights.
If the Telewest Rights have been exercised prior to the closing of the NTL
Transaction, the Company's shareholders may receive (at the option of NTL), in
lieu of a portion of the consideration allocable to the interest subject to
the exercised Telewest Rights, the per share proceeds from the sale of the
interest to Telewest (net of taxes on gain on sale), payable in cash or shares
of NTL common stock valued at the greater of $30.00 per share or the Average
Price at closing (the "Exercise Consideration").
Similarly, if at closing either of the Telewest Rights have not been
exercised and have not been waived or otherwise expired, the Company's
shareholders may receive (at the option of NTL), shares of a new class of NTL
preferred stock equal to a portion of the consideration allocable to the
interest subject to the unexercised Telewest Rights. Any shares of NTL
preferred stock would have the same voting and dividend rights as shares
F-42
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
of NTL common stock, would be subject to redemption as described below, and
would be expected to be listed for trading on Nasdaq. If following closing the
Telewest Rights are exercised, the NTL preferred stock will be redeemed for
the Exercise Consideration (based on the Average Price at the time of
exercise). If the Telewest Rights are resolved without being exercised, the
NTL preferred stock will be redeemed for NTL common stock on a one-for-one
basis.
Of the consideration to be received by the Company's shareholders in the NTL
Transaction, the parties have allocated 31% to the Company's interest in Cable
London and 17% to the Company's interest in Birmingham Cable. However, if
either or both of the Telewest Rights are exercised, the actual consideration
to be received by the Company's shareholders may be materially different from
the portion of the consideration (the "allocable portion") which has been
allocated by the parties to the Company's respective interests in Cable London
and Birmingham Cable, depending on, among other things, the value of these
interests, as finally determined, whether NTL exercises its option to deliver
the Exercise Consideration in lieu of the allocable portion and, the amount of
any taxes payable by the Company on the sale of these interests.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
Subsidiaries of the Company maintain their books and records in accordance
with accounting principles generally accepted in the UK. The consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles as practiced in the United States ("US") and are stated
in UK pounds sterling ("UK Pound"). There were no significant differences
between accounting principles followed for UK purposes and generally accepted
accounting principles practiced in the US. The UK Pound exchange rate as of
December 31, 1997 and 1996 was US $1.65 and US $1.71, respectively.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and all wholly owned subsidiaries. All significant intercompany accounts and
transactions among the consolidated entities have been eliminated.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Values
The estimated fair value amounts presented in these notes to consolidated
financial statements have been determined by the Company using available
market information and appropriate methodologies. However, considerable
judgment is required in interpreting market data to develop the estimates of
fair value. The estimates presented herein are not necessarily indicative of
the amounts that the Company could realize in a current market exchange. The
use of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts. Such fair value estimates
are based on pertinent information available to management as of December 31,
1997 and 1996, and have not been comprehensively revalued for purposes of
these consolidated financial statements since such dates. A reasonable
estimate of the amounts due to affiliates
F-43
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
and long-term debt due to shareholder is not practicable to obtain because of
the related party nature of these items and the lack of quoted market prices.
Cash Equivalents and Short-term Investments
Cash equivalents consist principally of commercial paper, time deposits and
money market funds with maturities of three months or less when purchased.
Short-term investments as of December 31, 1996 consist principally of
commercial paper and corporate floating rate notes with maturities greater
than three months when purchased. The carrying amounts of the Company's cash
equivalents and short-term investments, classified as available for sale
securities, approximate their fair values.
Investments in Affiliates
Investments in entities in which the Company has the ability to exercise
significant influence over the operating and financial policies of the
investee are accounted for under the equity method. Equity method investments
are recorded at original cost and adjusted periodically to recognize the
Company's proportionate share of the investees' net income or losses after the
date of investment, additional contributions made and dividends received. The
differences between the Company's recorded investments and its proportionate
interests in the book value of the investees' net assets are being amortized
to equity in net losses of affiliates over the remaining original lives of the
related franchises of eight years.
Prematurity Period
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable telecommunications systems in Teesside
and Cambridge Cable under the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 51, "Financial Reporting by Cable Television
Companies."
Under SFAS No. 51, during the period while the systems are partially under
construction and partially in service (the "Prematurity Period"), costs of
cable telecommunications plant, including materials, direct labor and
construction overhead are capitalized. Subscriber-related costs and general
and administrative costs are expensed as incurred. Costs incurred in
anticipation of servicing a fully operating system that will not vary
regardless of the number of subscribers are partially expensed and partially
capitalized, based upon the percentage of average actual or estimated
subscribers, whichever is greater, to the total number of subscribers expected
at the end of the Prematurity Period (the "Fraction").
During the Prematurity Period, depreciation and amortization of system
assets is determined by multiplying the depreciation and amortization of the
total capitalized system assets expected at the end of the Prematurity Period
by the Fraction. At the end of the Prematurity Period, depreciation and
amortization of system assets is based on the remaining undepreciated cost at
that date.
As of December 31, 1997, two of the Company's five franchise areas which are
under construction have completed their Prematurity Period. The remaining
Prematurity Periods are expected to terminate at various dates in 1998 and
1999.
Property and Equipment
Property and equipment, which consists principally of system assets, is
shown at historical cost less accumulated depreciation. Improvements that
extend asset lives are capitalized; other repairs and maintenance charges are
expensed as incurred. The cost and related accumulated depreciation applicable
to assets sold or
F-44
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
retired are removed from the accounts and the gain or loss on disposition is
recognized as a component of depreciation expense.
System assets
Prior to the Prematurity Period, no depreciation is provided on system
assets. During the Prematurity Period, depreciation is provided in accordance
with SFAS No. 51.
Depreciation of system assets is provided by the straight-line method over
estimated useful lives as follows:
<TABLE>
<S> <C>
Plant............................................................ 15-40 years
Network.......................................................... 15 years
Subscriber equipment............................................. 6-10 years
Switch........................................................... 10 years
Computers........................................................ 4 years
</TABLE>
Non-system assets
Depreciation of non-system assets is provided by the straight-line method
over estimated useful lives as follows:
<TABLE>
<S> <C>
Buildings........................................................... 40 years
Fixtures, fittings and equipment.................................... 5 years
Vehicles............................................................ 4 years
Computers........................................................... 4 years
</TABLE>
Leased Assets
Assets held under capital leases are treated as if they had been purchased
outright and the corresponding liability is included in long-term debt.
Capital lease payments include principal and interest, with the interest
portion being expensed. Payments on operating leases are expensed on a
straight-line basis over the lease term.
Deferred Charges
Deferred charges consist primarily of franchise acquisition costs
attributable to obtaining, developing and maintaining the franchise licenses
of Teesside and Cambridge Cable, debt acquisition costs relating to the sale
of approximately $517.3 million principal amount at maturity of the Company's
11.20% Senior Discount Debentures Due 2007 (the "2007 Discount Debentures"--
see Note 7) and goodwill arising from the SingTel Transaction (see Note 4).
Franchise acquisition costs are being amortized on a straight-line basis over
the remaining original lives of the related franchises of 12 to 15 years. Debt
acquisition costs are being amortized on a straight-line basis over the term
of the 2007 Discount Debentures of 12 years. Goodwill is being amortized on a
straight-line basis over the remaining original lives of the related
franchises of 11 years.
Valuation of Long-Lived Assets
The Company periodically evaluates the recoverability of its long-lived
assets, including property and equipment and deferred charges, using objective
methodologies. Such methodologies include evaluations based on the cash flows
generated by the underlying assets or other determinants of fair value.
F-45
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Revenue Recognition
Service income is recognized as service is provided. Credit risk is managed
by disconnecting services to subscribers who are delinquent.
Stock-Based Compensation
Effective January 1, 1996, the Company adopted the provisions of SFAS No.
123, "Accounting for Stock-Based Compensation," which encourages, but does not
require, companies to record compensation cost for stock-based compensation
plans at fair value. The Company has elected to continue to account for stock-
based compensation in accordance with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations,
as permitted by SFAS No. 123. Compensation expense for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of grant over the amount an employee must pay to acquire the
stock. Compensation expense for stock appreciation rights is recorded annually
based on changes in quoted market prices of the Company's stock or other
determinants of fair value at the end of the year (see Note 8).
Income Taxes
The Company is exempt from US federal, state and local income taxes. At the
present time, no income, profit, capital or capital gains taxes are levied in
Bermuda and, accordingly, no provision for such taxes has been recorded by the
Company. In the event that such taxes are levied, the Company has received an
undertaking from the Bermuda Government exempting it from all such taxes until
March 2016.
The Company's wholly owned subsidiaries recognize deferred tax assets and
liabilities for temporary differences between the financial reporting basis
and the tax basis of their assets and liabilities and expected benefits of
utilizing net operating loss carryforwards. The impact on deferred taxes of
changes in tax rates and laws, if any, applied to the years during which
temporary differences are expected to be settled, are reflected in the
financial statements in the period of enactment.
Derivative Financial Instruments
The Company uses derivative financial instruments, principally foreign
exchange option contracts ("FX Options"), to manage its exposure to
fluctuations in foreign currency exchange rates. Written FX Options are
marked-to-market on a current basis in the Company's consolidated statement of
operations (see Note 6).
Those instruments that have been entered into by the Company to hedge
exposure to foreign currency exchange rate risks are periodically examined by
the Company to ensure that the instruments are matched with underlying
liabilities, reduce the Company's risks relating to foreign currency exchange
rates, and, through market value and sensitivity analysis, maintain a high
correlation to the underlying value of the hedged item. For those instruments
that do not meet the above criteria, variations in their fair value are
marked-to-market on a current basis in the Company's consolidated statement of
operations.
The Company does not hold or issue any derivative financial instruments for
trading purposes and is not a party to leveraged instruments (see Notes 6 and
7). The credit risks associated with the Company's derivative financial
instruments are controlled through the evaluation and monitoring of the
creditworthiness of the counterparties. Although the Company may be exposed to
losses in the event of nonperformance by the counterparties, the Company does
not expect such losses, if any, to be significant.
F-46
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Net Loss Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share," which was adopted by the Company effective
for the year ended December 31, 1997, as required by the statement. For the
years ended December 31, 1997, 1996 and 1995, the Company's potential common
shares have an antidilutive effect on the loss per share and, therefore, have
not been used in determining the total weighted average number of common
shares outstanding. Diluted loss per share for 1997, 1996 and 1995 is
antidilutive and, therefore, has not been presented.
Reclassifications
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to those classifications used in 1997.
3. TEESSIDE ACQUISITION
In June 1994, the Company acquired all of the outstanding shares of two
companies that owned Teesside, which comprise an area containing approximately
254,000 homes. The construction of Teesside's cable telecommunications network
commenced in the third quarter of 1994. Teesside added its initial cable and
telephony subscribers in June 1995.
4. SINGTEL TRANSACTION
In March 1996, the Company completed the acquisition (the "SingTel
Transaction") of Singapore Telecom International Pte. Limited's ("Singapore
Telecom") 50% interest in Cambridge Cable, pursuant to the terms of a Share
Exchange Agreement executed by the parties in December 1995. In exchange for
Singapore Telecom's 50% interest in Cambridge Cable and certain loans made to
Cambridge Cable, with accrued interest thereon, the Company issued
approximately 8.9 million of its Class A Common Shares and paid approximately
(Pounds)11.8 million to Singapore Telecom. The Company accounted for the
SingTel Transaction under the purchase method. As a result of the SingTel
Transaction, the Company owns 100% of Cambridge Cable and Cambridge Cable was
consolidated with the Company effective March 31, 1996.
The following unaudited pro forma information for the years ended December
31, 1996 and 1995 has been presented as if the SingTel Transaction had
occurred on January 1, 1995. This unaudited pro forma information is based on
historical results of operations adjusted for acquisition costs and, in the
opinion of management, is not necessarily indicative of what results would
have been had the Company owned 100% of Cambridge Cable since January 1, 1995
(in thousands, except per share data).
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Revenues..................................... (Pounds)38,651 (Pounds)22,859
Net loss..................................... (42,300) (37,616)
Net loss per share........................... (.84) (.75)
</TABLE>
5. INVESTMENTS IN AFFILIATES
The Company has historically invested in three affiliates (the "Equity
Investees," which term excludes Cambridge Cable as of, and subsequent to March
31, 1996--see Note 4): Birmingham Cable, Cable London and Cambridge Cable. The
Equity Investees operate integrated cable communications, residential
telephony and
F-47
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
business telecommunications systems in their respective major metropolitan
areas under exclusive cable television licenses and non-exclusive
telecommunications licenses. As of December 31, 1997, the Company's ownership
interest in the Equity Investees is as follows:
<TABLE>
<S> <C>
Birmingham Cable................................................... 27.5%
Cable London....................................................... 50.0%
</TABLE>
The Company also has a 16.4% interest in Cable Programme Partners-1 Limited
Partnership ("CPP-1") which previously developed and distributed cable
programming in the UK. During 1995, CPP-1 sold its only channel and has wound
down its operations to a minimal level of activity. The carrying value of the
Company's investment in CPP-1 has been reduced to zero and the Company has no
future funding commitments to CPP-1.
Included in investments in affiliates as of December 31, 1997 and 1996, are
loans to Cable London of (Pounds)28.5 million and (Pounds)22.5 million and
accrued interest of (Pounds)6.0 million and (Pounds)3.6 million, respectively.
The loans accrue interest at a rate of 2% above the published base lending
rate of Barclays Bank PLC (9.25% effective rate as of December 31, 1997) and
are subordinate to Cable London's revolving bank credit facility. Of these
loans, (Pounds)21.0 million as of December 31, 1997 and 1996 are convertible
into ordinary shares of Cable London at a per share conversion price of
(Pounds)2.00. Also included in investments in affiliates as of December 31,
1997 are loans to Birmingham Cable of (Pounds)1.9 million and accrued interest
of (Pounds)133,000. The Birmingham Cable loans accrue interest at a fixed rate
of 7.80% and are subordinate to Birmingham Cable's credit facility. Loans to
Cambridge Cable and related accrued interest have been eliminated in
consolidation subsequent to the SingTel Transaction (see Note 4).
In February 1995, a subsidiary of Birmingham Cable issued 175,000 cumulative
(Pounds)1.00 redeemable five year term preference shares for a paid up value
of (Pounds)175.0 million. Also in February 1995, Birmingham Cable entered into
a (Pounds)175.0 million five year revolving credit facility (the "Birmingham
Facility") which provided for conversion into a five year term loan on March
31, 2000. In March 1997, the terms of the Birmingham Facility were amended to
extend the maturity of the term loan to December 31, 2005 and to amend the
required cash flow levels (as defined) and certain other terms. Interest rates
on the Birmingham Facility are at the London Interbank Offered Rate ("LIBOR")
plus 5/8% to 2 1/4%.
In July 1997, the preference shareholder exercised its option to require
Birmingham Cable to purchase its shareholding. Birmingham Cable funded the
redemption of the preference shares with the proceeds from the Birmingham
Facility and restricted cash and settled its five year (Pounds)175.0 million
interest rate exchange agreement with Barclays Bank PLC. The balance of the
Birmingham Facility will be used, subject to certain restrictions, for capital
expenditures and working capital requirements relating to the build-out of its
systems. The preference shares had an effective dividend rate, including
Advanced Corporation Tax ("ACT"), of 8.00%.
The Birmingham Facility contains restrictive covenants which limit
Birmingham Cable's ability to enter into arrangements for the acquisition and
sale of property and equipment, investments, mergers and the incurrence of
additional debt. Certain of these covenants require that certain minimum build
requirements, financial ratios and cash flow levels be maintained and contain
restrictions on dividend payments. Birmingham Cable's three principal
shareholders' (including the Company) right to receive consulting fee payments
from Birmingham Cable has been subordinated to the banks under the Birmingham
Facility. The payment of consulting fees is restricted until Birmingham Cable
meets certain financial ratio tests under the Birmingham Facility. Birmingham
Cable has pledged the shares of its material subsidiaries to secure the
Birmingham Facility. Upon a change of control, all amounts due under the
Birmingham Facility become immediately due and payable. The
F-48
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
consummation of the NTL Transaction will not result in a change of control as
defined in the Birmingham Facility.
In May 1997, Cable London entered into a (Pounds)170.0 million revolving
credit facility (the "London Revolver") with various banks, which converts
into a five year term loan on June 30, 2001. Interest rates on the London
Revolver are at LIBOR plus 1/2% to 2 3/8%. In May 1997, Cable London repaid
all amounts outstanding under its existing credit facility with proceeds from
borrowings under the London Revolver. The balance of the London Revolver will
be used, subject to certain restrictions, for capital expenditures and working
capital requirements relating to the build-out of its systems.
The London Revolver contains restrictive covenants which limit Cable
London's ability to enter into arrangements for the acquisition and sale of
property and equipment, investments, mergers and the incurrence of additional
debt. Certain of these covenants require that certain financial ratios and
cash flow levels be maintained and contain certain restrictions on dividend
payments. The Company's right to receive consulting fee payments from Cable
London has been subordinated to the banks under the London Revolver. The
payment of consulting fees is restricted until Cable London meets certain
financial ratio tests under the London Revolver. In addition, the Company's
shares in Cable London have been pledged to secure the London Revolver. Upon a
change of control, all amounts due under the London Revolver become
immediately due and payable. The consummation of the NTL Transaction will not
result in a change of control as defined in the London Revolver.
Although the Company is not contractually committed to make any additional
capital contributions or advances to any of the Equity Investees, it currently
intends to fund its share of the amounts necessary for capital expenditures
and to finance operating deficits. Failure to do so could dilute the Company's
ownership interests in the Equity Investees.
F-49
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Summarized financial information for affiliates accounted for under the
equity method for 1997, 1996 and 1995, is as follows:
<TABLE>
<CAPTION>
BIRMINGHAM CABLE CAMBRIDGE
CABLE LONDON CABLE(1) CPP-1(2) COMBINED
-------------- -------------- ----------- ----------- ---------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1997
Results of operations
Service income........ (Pounds)67,166 (Pounds)52,816 (Pounds) (Pounds) (Pounds)119,982
Operating, selling,
general and
administrative
expenses............. (56,564) (45,787) (102,351)
Depreciation and
amortization......... (26,427) (19,740) (46,167)
Operating loss........ (15,825) (12,711) (28,536)
Net loss.............. (30,826) (25,168) (55,994)
Company's equity in
net loss............. (8,616) (12,743) (21,359)
AT DECEMBER 31, 1997
Financial position
Current assets........ 11,424 10,340 21,764
Noncurrent assets..... 248,611 185,353 433,964
Current liabilities... 22,293 22,902 45,195
Noncurrent
liabilities.......... 165,413 173,038 338,451
YEAR ENDED DECEMBER 31,
1996
Results of operations
Service income........ 52,472 40,091 6,401 98,964
Operating, selling,
general and
administrative
expenses............. (44,476) (39,135) (6,366) (89,977)
Depreciation and
amortization......... (19,690) (14,862) (2,168) (36,720)
Operating loss........ (11,694) (13,906) (2,133) (27,733)
Net loss.............. (20,378) (21,241) (4,419) (46,038)
Company's equity in
net loss............. (5,671) (10,551) (2,210) (18,432)
AT DECEMBER 31, 1996
Financial position
Current assets........ 70,531 10,217 80,748
Noncurrent assets..... 255,115 159,906 415,021
Current liabilities... 33,628 85,183 118,811
Noncurrent
liabilities.......... 188,863 60,831 249,694
YEAR ENDED DECEMBER 31,
1995
Results of operations
Service income........ 39,004 30,277 20,585 1,088 90,954
Operating, selling,
general and
administrative
expenses............. (35,894) (33,238) (26,273) (5,673) (101,078)
Depreciation and
amortization......... (14,455) (10,847) (7,150) (34) (32,486)
Operating loss........ (11,345) (13,808) (12,838) (4,619) (42,610)
Net loss.............. (14,279) (17,675) (20,398) (5,388) (57,740)
Company's equity in
net loss............. (3,922) (8,657) (10,200) (898) (23,677)
</TABLE>
- --------
(1) 1996 results of operations information for Cambridge Cable is for the
three months ended March 31, 1996 (see Note 4).
(2)1995 results of operations information for CPP-1 is for the six months
ended June 30, 1995.
F-50
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
6. FOREIGN CURRENCY RISK MANAGEMENT
The Company is exposed to market risk including changes in foreign currency
exchange rates. To manage the volatility relating to this exposure, the
Company enters into various derivative transactions pursuant to the Company's
policies in areas such as counterparty exposure and hedging practices.
Positions are monitored using techniques including market value and
sensitivity analyses.
The Company has entered into certain FX Options as a normal part of its
foreign currency risk management efforts. During 1995, the Company entered
into certain foreign exchange put option contracts ("FX Puts") which may be
settled only on November 16, 2000. These FX Puts are used to limit the
Company's exposure to the risk that the eventual cash outflows related to net
monetary liabilities denominated in currencies other than its functional
currency (the UK Pound) (principally the 2007 Discount Debentures--see Note 7)
are adversely affected by changes in exchange rates. As of December 31, 1997
and 1996, the Company had (Pounds)250.0 million notional amount of FX Puts to
purchase US dollars at an exchange rate of $1.35 per (Pounds)1.00 (the
"Ratio"). The FX Puts provide a hedge, to the extent the exchange rate falls
below the Ratio, against the Company's net monetary liabilities denominated in
US dollars since gains and losses realized on the FX Puts are offset against
foreign exchange gains or losses realized on the underlying net liabilities.
Premiums paid for the FX Puts of (Pounds)13.9 million are included in foreign
exchange put options and other in the Company's consolidated balance sheet,
net of related amortization. These premiums are being amortized over the terms
of the related contracts of five years. As of December 31, 1997 and 1996, the
FX Puts had carrying values of (Pounds)8.0 million and (Pounds)10.7 million,
respectively. The estimated fair value of the FX Puts was (Pounds)3.2 million
as of both December 31, 1997 and 1996. The difference between the carrying
amount and the estimated fair value of the FX Puts was not significant as of
December 31, 1995.
In 1995, in order to reduce hedging costs, the Company sold foreign exchange
call option contracts ("FX Calls") to exchange (Pounds)250.0 million notional
amount and received (Pounds)3.4 million. These contracts may only be settled
on their expiration dates. Of these contracts, (Pounds)200.0 million notional
amount, with an exchange ratio of $1.70 per (Pounds)1.00, expired unexercised
in November 1996 while the remaining contract, with a (Pounds)50.0 million
notional amount and an exchange ratio of $1.62 per (Pounds)1.00, has a
settlement date in November 2000. In the fourth quarter of 1996, in order to
continue to reduce hedging costs, the Company sold additional FX Calls for 2.1
million, to exchange (Pounds)200.0 million notional amount at an average
exchange ratio of $1.75 per (Pounds)1.00. These contracts expired unexercised
in the fourth quarter of 1997. The FX Calls are marked-to-market on a current
basis in the Company's consolidated statement of operations.
As of December 31, 1997 and 1996, the estimated fair value of the
liabilities related to the FX Calls, as recorded in the Company's consolidated
balance sheet, was (Pounds)2.7 million and (Pounds)7.2 million, respectively.
Changes in fair value between measurement dates relating to the FX Calls
resulted in exchange gains of (Pounds)4.5 million during the year ended
December 31, 1997 and exchange losses of (Pounds)1.3 million during the year
ended December 31, 1996 in the Company's consolidated statement of operations.
There were not significant exchange gains or losses relating to these
contracts for the year ended December 31, 1995.
7. LONG-TERM DEBT
2007 Discount Debentures
In November 1995, the Company received net proceeds of approximately $291.1
million ((Pounds)186.9 million) from the sale of its 2007 Discount Debentures
in a public offering ($517.3 million principal at maturity). Interest accretes
on the 2007 Discount Debentures at 11.20% per annum compounded semi-annually
from November 15,
F-51
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1995 to November 15, 2000, after which date interest will be paid in cash on
each May 15 and November 15 through November 15, 2007. The accreted value of
the 2007 Discount Debentures was (Pounds)229.2 million and (Pounds)198.1
million as of December 31, 1997 and 1996, respectively.
The 2007 Discount Debentures contain restrictive covenants which limit the
Company's ability to enter into arrangements for the sale of assets, mergers,
the incurrence of additional debt and the payment of dividends. The Company
was in compliance with such restrictive covenants as of December 31, 1997.
Consummation of the NTL Transaction (see Note 1) is subject to consent of the
Company's bondholders.
UK Holdings Credit Facility
On December 23, 1997, UK Holdings entered into a loan agreement (the "UK
Holdings Agreement") with a consortium of banks to provide financing under a
credit facility (the "UK Holdings Credit Facility") up to a maximum of
(Pounds)200.0 million. Under the terms of the UK Holdings Agreement,
borrowings under the UK Holdings Credit Facility are guaranteed by Teesside
and Cambridge Cable.
On January 14, 1998, UK Holdings borrowed (Pounds)75.0 million under Tranche
A of the UK Holdings Credit Facility. Of this initial borrowing, (Pounds)50.4
million was paid to the Company as a dividend and (Pounds)17.8 million was
used to fund capital expenditures and working capital requirements at
Cambridge Cable and Teesside. Amounts available under the UK Holdings Credit
Facility will be reduced each quarter in varying amounts beginning March 31,
2000 and continuing through December 31, 2000. The UK Holdings Credit Facility
bears interest at a rate per annum equal to LIBOR plus 1/2% to 2 1/4%.
The UK Holdings Credit Facility contains restrictive covenants which limit
UK Holdings' ability to enter into arrangements for the acquisition and sale
of property and equipment, investments, mergers and the incurrence of
additional debt. Certain of these covenants require that certain financial
ratios and cash flow levels be maintained and contain certain restrictions on
dividend payments. The Company's right to receive consulting fee payments from
Cambridge Cable and Teesside has been subordinated to the banks under the UK
Holdings Credit Facility. In addition, the Company's shares in UK Holdings
have been pledged to secure the UK Holdings Credit Facility.
The consummation of the NTL Transaction will result in a change in control,
as defined in the UK Holdings Credit Facility. Upon a change in control, all
amounts outstanding under the UK Holdings Credit Facility will become
immediately due and payable.
Other
As of December 31, 1997 and 1996, Cambridge Cable has two outstanding bank
loans totaling (Pounds)505,000 and (Pounds)533,000, respectively, which are
included in long-term debt. These bank loans are secured by Cambridge Cable's
land and buildings in Cambridge and Bishop Stortford and are payable in
quarterly installments through April 2000 and bear interest at a weighted
average fixed rate of 9.35%. Also included in long-term debt are capital lease
obligations of Cambridge Cable and Teesside (see Note 12).
Maturities of long-term debt outstanding, including long-term debt, due to
shareholder (see Note 9), as of December 31, 1997 for the four years after
1998 are as follows (in (Pounds)000's):
<TABLE>
<S> <C>
1999...................................................... (Pounds)12,658
2000...................................................... 665
2001...................................................... 528
2002...................................................... 498
</TABLE>
F-52
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
The Company's long-term debt, excluding long-term debt due to shareholder,
had estimated fair values of (Pounds)259.6 million and (Pounds)219.7 million
as of December 31, 1997 and 1996, respectively. The estimated fair value of
the Company's publicly traded debt is based on quoted market prices for that
debt. Interest rates that are currently available to the Company for issuance
of debt with similar terms and remaining maturities are used to estimate fair
value for debt issues for which quoted market prices are not available.
8. STOCK OPTION/SAR PLANS
The Company implemented a Stock Appreciation Rights ("SARs") plan during
1995 for certain outside directors under which the terms of the SARs granted
are determined by the Compensation Committee of the Board of Directors (the
"SAR Plan"). Under the SAR Plan, eligible participants are entitled to receive
a cash payment from the Company equal to 100% of the excess, if any, of the
fair market value of a share of the Company's Class A Common Shares at the
time of exercise over the fair market value of such a share at the grant date.
Under the SAR Plan, a total of 50,000 SARs may be granted. The SARs have a
term of ten years from the date of grant and are immediately exercisable. No
SARs were granted in 1997. A total of 6,000 and 15,000 SARs were granted in
1996 and 1995, respectively and 14,000 SARs were outstanding at December 31,
1997, all exercisable. The fair value of the Company's Class A Common Stock at
the grant date of the SARs was $12.63 and $16.25 for 1996 and 1995 grants,
respectively. Compensation expense recorded during the year ended December 31,
1996 was not significant. No compensation expense was recognized during the
years ended December 31, 1997 and December 31, 1995 as the exercise price of
the SARs was not less then the fair value of a share of the Company's Class A
Common Shares.
The Company implemented a qualified stock option plan during 1995 for
certain employees, officers and directors, under which the option prices and
other terms are determined by the Compensation Committee of the Board of
Directors (the "Option Plan"). Under the Option Plan, not more than 250,000 of
the Company's Class A Common Shares may be issued pursuant to the plan upon
exercise of qualified stock options. All options must be granted within ten
years from the date of adoption of the Option Plan, with options becoming
exercisable over four years from the date of grant. A total of 20,250 options,
with an exercise price of $12.63, were granted in 1996 and are outstanding
(none exercisable) at December 31, 1997. No options were granted in 1997 or
1995. No compensation expense has been recognized under the Option Plan as the
exercise price of the grants was not less than the fair market value of the
shares at the grant date. The fair value of the options granted in 1996 was
not significant.
9. RELATED PARTY TRANSACTIONS
Comcast U.K. Consulting, Inc. ("UK Consulting"), a wholly owned subsidiary
of the Company, earns consulting fee income under consulting agreements with
the Equity Investees. The consulting fee income is generally based on a
percentage of gross revenues or a fixed amount per dwelling unit in the Equity
Investees' franchise areas.
The Company's right to receive consulting fee payments from Birmingham Cable
and Cable London has been subordinated to the banks under their credit
facilities. Accordingly, a portion of these fees have been classified as long-
term receivables and are included in investments in affiliates in the
Company's consolidated balance sheet. In addition, the Company's shares in
Cable London have been pledged to secure amounts outstanding under the London
Revolver.
Management fee expense is incurred under agreements between the Company on
the one hand, and Comcast, the Company's controlling shareholder, and Comcast
UK Cable Partners Consulting, Inc. ("Comcast
F-53
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Consulting"), an indirect wholly owned subsidiary of Comcast, on the other,
whereby Comcast and Comcast Consulting provide consulting services to the
Equity Investees on behalf of the Company and management services to the
Company. Such management fees are based on Comcast's and Comcast Consulting's
cost of providing such services. As of December 31, 1997 and 1996, due to
affiliates consists primarily of this management fee and operating expenses
paid by Comcast and its affiliates on behalf of the Company.
Investment income includes (Pounds)2.5 million, (Pounds)2.9 million and
(Pounds)5.0 million of interest income in 1997, 1996 and 1995, respectively,
relating to the loans to Birmingham Cable, Cable London and Cambridge Cable
described in Note 5.
Long-term debt, due to shareholder consists of 9% Subordinated Notes payable
to Holdings (the "Notes") which are due in 1999. During the years ended
December 31, 1997, 1996 and 1995, interest expense on the Notes was
(Pounds)950,000, (Pounds)870,000 and (Pounds)800,000, respectively.
In management's opinion, the foregoing transactions were entered into on
terms no more or less favorable than those with non-affiliated parties.
10. INCOME TAXES
The Company's wholly owned subsidiaries have a deferred tax asset arising
from the carryforward of net operating losses and the differences between the
book and tax basis of property. However, a valuation allowance has been
recorded to fully reserve the deferred tax asset as its realization is
uncertain.
Significant components of deferred income taxes are as follows (in
(Pounds)000's):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Net operating loss carryforwards (carried
forward indefinitely).................... (Pounds)14,382 (Pounds)13,485
Differences between book and tax basis of
property................................. 7,959 1,024
Other..................................... 321 170
Less: Valuation allowance................. (22,662) (14,679)
-------------- --------------
(Pounds) (Pounds)
============== ==============
</TABLE>
11. STATEMENT OF CASH FLOWS--SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of approximately (Pounds)559,000
and (Pounds)418,000 during the years ended December 31, 1997 and 1996,
respectively. There were no cash interest payments made during the year ended
December 31, 1995.
The Company's wholly owned subsidiaries incurred capital lease obligations
of (Pounds)2.1 million, (Pounds)1.2 million and (Pounds)490,000 during the
years ended December 31, 1997, 1996 and 1995, respectively.
12. COMMITMENTS AND CONTINGENCIES
Certain of the Company's facilities and equipment are held under operating
or capital leases which expire through 2008.
F-54
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
A summary of assets held under capital lease are as follows (in
(Pounds)000's):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1996
-------------- -------------
<S> <C> <C>
Land, buildings and equipment................. (Pounds)10,735 (Pounds)8,605
Less: Accumulated depreciation................ (3,165) (834)
-------------- -------------
(Pounds) 7,570 (Pounds)7,771
============== =============
</TABLE>
Future minimum rental payments under lease commitments with an initial or
remaining term of more than one year of December 31, 1997 are as follows (in
(Pounds)000's):
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
------------- -------------
<S> <C> <C>
1998.......................................... (Pounds)2,191 (Pounds)1,580
1999.......................................... 1,753 969
2000.......................................... 902 283
2001.......................................... 706 63
2002.......................................... 629 63
Thereafter.................................... 1,731 36
------------- -------------
Total minimum rental commitments.............. (Pounds)7,912 (Pounds)2,994
=============
Less: Amount representing interest............ (1,874)
-------------
Present value of minimum rental commitments... 6,038
Less: Current portion of capital lease
obligations.................................. (1,660)
-------------
Long-term portion of capital lease
obligations.................................. (Pounds)4,378
=============
</TABLE>
Operating lease expense for the years ended December 31, 1997, 1996 and 1995
was (Pounds)1.7 million, (Pounds)1.5 million and (Pounds)328,000,
respectively.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect
the financial position, results of operations or liquidity of the Company.
F-55
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER(1) QUARTER QUARTER(2) YEAR
--------------- -------------- -------------- -------------- --------------
((Pounds)000, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1997
Revenues................ (Pounds) 12,351 (Pounds)13,350 (Pounds)14,241 (Pounds)16,720 (Pounds)56,662
Operating loss.......... (6,543) (6,364) (5,679) (4,018) (22,604)
Equity in net losses of
affiliates............. (5,152) (5,162) (5,195) (5,850) (21,359)
Net loss................ (20,540) (13,108) (20,682) (13,026) (67,356)
Net loss per share...... (.41) (.26) (.41) (.26) (1.34)
1996
Revenues................ (Pounds) 2,334 (Pounds) 9,452 (Pounds)10,090 (Pounds)10,552 (Pounds)32,428
Operating loss.......... (3,765) (6,128) (7,398) (7,262) (24,553)
Equity in net losses of
affiliates............. (5,698) (3,942) (4,166) (4,626) (18,432)
Net loss................ (11,987) (11,292) (14,571) (2,725) (40,575)
Net loss per share...... (.28) (.22) (.30) (.04) (.84)
</TABLE>
- --------
(1) The Company began consolidating Cambridge Cable effective March 31, 1996.
(2) The fourth quarter of 1996 net loss includes (Pounds)12.9 million of
foreign currency exchange rate gains resulting from fluctuations in the
foreign currency exchange rate.
F-56
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
QUARTER ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1998
-------------------------
(IN (Pounds)000'S, EXCEPT
SHARE DATA)
<S> <C>
ASSETS
CURRENT ASSETS.......................................
Cash and cash equivalents.......................... (Pounds) 98,201
Accounts receivable, less allowance for doubtful
accounts of (Pounds)2,599......................... 3,887
Other current assets............................... 4,634
---------------
Total current assets............................. 106,722
---------------
INVESTMENTS IN AFFILIATES............................ 57,704
---------------
PROPERTY AND EQUIPMENT............................... 333,053
Accumulated depreciation........................... (38,637)
---------------
Property and equipment, net........................ 294,416
---------------
DEFERRED CHARGES..................................... 62,455
Accumulated amortization........................... (15,519)
---------------
Deferred charges, net.............................. 46,936
---------------
FOREIGN EXCHANGE PUT OPTIONS, net.................... 7,275
---------------
(Pounds)513,053
===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES..................................
Accounts payable and accrued expenses.............. (Pounds) 26,424
Accrued interest................................... 332
Current portion of long-term debt.................. 1,955
Due to affiliates.................................. 1,073
---------------
Total current liabilities........................ 29,784
---------------
LONG-TERM DEBT, less current portion................. 312,842
---------------
FOREIGN EXCHANGE CALL OPTION......................... 2,725
---------------
LONG-TERM DEBT, due to shareholder................... 11,517
---------------
COMMITMENTS AND CONTINGENCIES........................
SHAREHOLDERS' EQUITY.................................
Preferred shares, (Pounds)0.1 par value--authorized
10,000,000 shares; issued, none...................
Class A common shares, (Pounds).01 par value--
authorized 50,000,000 shares; issued, 37,231,997.. 372
Class B common shares, (Pounds).01 par value--
authorized 50,000,000 shares; issued, 12,872,605.. 129
Additional capital................................. 358,548
Accumulated deficit................................ (202,864)
---------------
Total shareholders' equity....................... 156,185
---------------
(Pounds)513,053
===============
</TABLE>
See notes to condensed consolidated financial statements.
F-57
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS AND ACCUMULATED DEFICIT
QUARTER ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
1998 1997
---------------- ----------------
(IN 000'S EXCEPT PER
SHARE DATA)
<S> <C> <C>
REVENUES
Service income.......................... (Pounds) 17,302 (Pounds) 12,118
Consulting fee income................... 274 233
---------------- ----------------
17,576 12,351
---------------- ----------------
COSTS AND EXPENSES
Operating............................... 5,661 4,729
Selling, general and administrative..... 8,489 7,399
Management fees......................... 755 843
Depreciation and amortization........... 7,254 5,923
---------------- ----------------
22,159 18,894
---------------- ----------------
OPERATING LOSS............................ (4,583) (6,543)
OTHER (INCOME) EXPENSE....................
Interest expense........................ 8,470 6,051
Investment income....................... (2,229) (2,101)
Equity in net losses of affiliates...... 6,415 5,152
Exchange (gains) losses and other....... (1,748) 4,895
---------------- ----------------
10,908 13,997
---------------- ----------------
NET LOSS.................................. (15,491) (20,540)
ACCUMULATED DEFICIT.......................
Beginning of period..................... (187,373) (120,017)
---------------- ----------------
End of period........................... (Pounds)(202,864) (Pounds)(140,557)
================ ================
NET LOSS PER SHARE........................ (Pounds) (.31) (Pounds) (.41)
================ ================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD............ 50,105 50,105
================ ================
</TABLE>
See notes to condensed consolidated financial statements.
F-58
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
QUARTER ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------
1998 1997
--------------- ---------------
(Pounds)000 (Pounds)000
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................... (Pounds)(15,491) (Pounds)(20,540)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization.............. 7,254 5,923
Amortization on foreign exchange
contracts................................. 683 683
Non-cash interest expense.................. 6,576 5,916
Non-cash investment income................. (694) (529)
Exchange (gains) losses.................... (2,854) 5,673
Equity in net losses of affiliates......... 6,415 5,152
--------------- ---------------
1,889 2,278
Decrease in accounts receivable and other
current assets............................ 1,153 243
Increase in accounts payable and accrued
expenses and accrued interest............. 3,151 1,585
--------------- ---------------
Net cash provided by operating
activities.............................. 6,193 4,106
--------------- ---------------
FINANCING ACTIVITIES
Repayment of debt.......................... (598) (391)
Proceeds from borrowing.................... 75,000
Deferred financing costs................... (1,627)
Net transactions with affiliates........... (141) (574)
--------------- ---------------
Net cash provided by (used in) financial
activities.............................. 72,634 (965)
--------------- ---------------
INVESTING ACTIVITIES
Proceeds from sales of short-term
investments, net.......................... 27,509
Capital contributions and loans to
affiliates................................ (1,768) (7,925)
Capital expenditures....................... (16,172) (18,670)
Deferred charges........................... (58) (235)
--------------- ---------------
Net cash (used in) provided by investing
activities.............................. (17,998) 679
--------------- ---------------
INCREASE IN CASH AND CASH EQUIVALENTS........ 60,829 3,820
CASH AND CASH EQUIVALENTS, beginning of
period...................................... 37,372 63,314
--------------- ---------------
CASH AND CASH EQUIVALENTS, end of period..... (Pounds) 98,201 (Pounds) 67,134
=============== ===============
</TABLE>
See notes to condensed consolidated financial statements.
F-59
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 1998
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The condensed consolidated balance sheet as of December 31, 1997 has been
condensed from the audited consolidated balance sheet as of that date. The
condensed consolidated balance sheet as of March 31, 1998 and the condensed
consolidated statements of operations and accumulated deficit and of cash
flows for the three months ended March 31, 1998 and 1997 have been prepared by
Comcast UK Cable Partners Limited (the "Company") and have not been audited by
the Company's independent auditors. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows as
of March 31, 1998 and for all periods presented have been made.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's December 31,
1997 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the period ended March 31, 1998 are
not necessarily indicative of operating results for the full year.
Reclassifications
Certain reclassifications have been made to the prior year condensed
consolidated financial statements to conform to those classifications used in
1998.
2. AMALGAMATION WITH NTL
On February 4, 1998, the Company entered into a definitive agreement to
amalgamate (the "NTL Transaction") with a wholly owned Bermuda subsidiary of
NTL Incorporated ("NTL"). NTL is an alternative telecommunications company in
the United Kingdom ("UK") and is listed on Nasdaq. The NTL Transaction is
expected to close in 1998, subject to, among other things, the receipt of
required Bermuda and UK regulatory approvals, the approval of the Company's
and NTL's shareholders, the consent of the Company's and NTL's bondholders,
the consent of certain NTL bank lenders and other customary closing matters.
Comcast Corporation ("Comcast"), through its indirect wholly owned subsidiary,
Comcast U.K. Holdings, Inc. ("Holdings"), is the sole holder of the multiple-
voting Class B Common Shares of the Company and has agreed to vote for the
transaction, assuring its approval by the Company's shareholders. Upon
consummation of the NTL Transaction, the Company would become a wholly owned
subsidiary of NTL.
Except in the circumstances described below, the Company's shareholders will
receive 0.3745 shares of NTL common stock for each of the Company's Class A
Common Shares or Class B Common Shares. If the average closing price of the
NTL common stock for a specified period of time prior to the Company's
shareholders meeting to approve the NTL Transaction (the "Average Price") is
less than $26.70, the Company will have the option to terminate the NTL
Transaction, subject to the right of NTL, to adjust the exchange ratio such
that one share of the Company's Class A Common Shares or Class B Common Shares
will be exchanged for a number of shares of NTL common stock equal to $10.00
(based on the Average Price).
Pursuant to existing arrangements between the Company and Telewest
Communications plc ("Telewest"), a co-owner of interests in Cable London PLC
("Cable London") and Birmingham Cable Corporation Limited ("Birmingham
Cable"), Telewest has certain rights (the "Telewest Rights") to acquire either
or both of the
F-60
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
QUARTER ENDED MARCH 31, 1998
Company's interests in these systems (see Note 3) as a result of the NTL
Transaction. However, as described in the following paragraphs, the
consummation of the NTL Transaction is not dependent on the resolution of the
Telewest Rights.
If the Telewest Rights have been exercised prior to the closing of the NTL
Transaction, the Company's shareholders may receive (at the option of NTL), in
lieu of a portion of the consideration allocable to the interest subject to
the exercised Telewest Rights, the per share proceeds from the sale of the
interest to Telewest (net of taxes on gain on sale), payable in cash or shares
of NTL common stock valued at the greater of $30.00 per share or the Average
Price at closing (the "Exercise Consideration").
Similarly, if at closing either of the Telewest Rights have not been
exercised and have not been waived or otherwise expired, the Company's
shareholders may receive (at the option of NTL), shares of a new class of NTL
preferred stock equal to a portion of the consideration allocable to the
interest subject to the unexercised Telewest Rights. Any shares of NTL
preferred stock would have the same voting and dividend rights as shares of
NTL common stock, would be subject to redemption as described below, and would
be expected to be listed for trading on Nasdaq. If following closing the
Telewest Rights are exercised, the NTL preferred stock will be redeemed for
the Exercise Consideration (based on the Average Price at the time of
exercise). If the Telewest Rights are resolved without being exercised, the
NTL preferred stock will be redeemed for NTL common stock on a one-for-one
basis.
Of the consideration to be received by the Company's shareholders in the NTL
Transaction, the parties have allocated 31% to the Company's interest in Cable
London and 17% to the Company's interest in Birmingham Cable. However, if
either or both of the Telewest Rights are exercised, the actual consideration
to be received by the Company's shareholders may be materially different from
the portion of the consideration (the "allocable portion") which has been
allocated by the parties to the Company's respective interests in Cable London
and Birmingham Cable, depending on, among other things, the value of these
interests, as finally determined, whether NTL exercises its option to deliver
the Exercise Consideration in lieu of the allocable portion and, the amount of
any taxes payable by the Company on the sale of those interests.
3. INVESTMENTS IN AFFILIATES
The Company has invested in two affiliates: Birmingham Cable and Cable
London (together, the "Equity Investees"). The Equity Investees operate
integrated cable communications, residential telephony and business
telecommunications systems in their respective major metropolitan areas under
exclusive cable television licenses and non-exclusive telecommunications
licenses. As of March 31, 1998, the Company's ownership interest in the Equity
Investees is as follows:
<TABLE>
<S> <C>
Birmingham Cable................................................... 27.5%
Cable London....................................................... 50.0%
</TABLE>
Included in investments in affiliates as of March 31, 1998 and December 31,
1997, are loans to Cable London of (Pounds)28.5 million and accrued interest
of (Pounds)6.7 million and (Pounds)6.0 million, respectively. The loans accrue
interest at a rate of 2% above the published base lending rate of Barclays
Bank plc (9.25% effective rate as of March 31, 1998) and are subordinate to
Cable London's credit facility. Of these loans, (Pounds)21.0 million as of
March 31, 1998 and December 31, 1997, are convertible into ordinary shares of
Cable London at a per share conversion price of (Pounds)2.00. Also included in
investments in affiliates as of March 31, 1998 and December 31, 1997, are
loans to Birmingham Cable of (Pounds)3.7 million and (Pounds)1.9 million and
accrued interest of (Pounds)177,000 and (Pounds)133,000, respectively. The
Birmingham Cable loans accrue interest at a fixed rate of 7.8% and are
subordinate to Birmingham Cable's credit facility.
F-61
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
QUARTER ENDED MARCH 31, 1998
Although the Company is not contractually committed to make any additional
capital contributions or advances to the Equity Investees, it currently
intends to fund its share of the amounts necessary for capital expenditures
and to finance operating deficits. Failure to do so could dilute the Company's
ownership interests in the Equity Investees.
Summarized financial information for affiliates accounted for under the
equity method is as follows:
<TABLE>
<CAPTION>
BIRMINGHAM CABLE
CABLE LONDON COMBINED
-------------- -------------- --------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
THREE MONTHS ENDED MARCH
31, 1998
Results of operations
Service income........... (Pounds)18,779 (Pounds)15,935 (Pounds)34,714
Operating, selling,
general and
administrative
expenses................ (14,582) (12,663) (27,245)
Depreciation and
amortization............ (6,486) (5,456) (11,942)
Operating loss........... (2,289) (2,184) (4,473)
Net loss................. (12,345) (5,870) (18,215)
Company's equity in net
loss.................... (3,432) (2,983) (6,415)
AT MARCH 31, 1998
Financial position
Current assets........... 8,888 10,664 19,552
Noncurrent assets........ 248,703 187,023 435,726
Current liabilities...... 21,256 23,344 44,600
Noncurrent liabilities... 176,350 180,461 356,811
THREE MONTHS ENDED MARCH
31, 1997
Results of operations
Service income........... 15,394 11,671 27,065
Operating, selling,
general and
administrative
expenses................ (13,454) (11,036) (24,490)
Depreciation and
amortization............ (6,293) (4,258) (10,551)
Operating loss........... (4,353) (3,623) (7,976)
Net loss................. (7,355) (6,109) (13,464)
Company's equity in net
loss.................... (2,058) (3,094) (5,152)
</TABLE>
4. LONG-TERM DEBT
UK Holdings Credit Facility
In December 1997, Comcast UK Holdings Limited ("UK Holdings"), a wholly
owned subsidiary of the Company, entered into a loan agreement (the "UK
Holdings Agreement") with a consortium of banks to provide financing under a
credit facility (the "UK Holdings Credit Facility") up to a maximum of
(Pounds)200.0 million. Under the terms of the UK Holdings Agreement,
borrowings under the UK Holdings Credit Facility are guaranteed by Cambridge
Holding Company Limited ("Cambridge Cable") and two companies holding the
franchises for Darlington and Teesside, England ("Teesside"). Cambridge Cable
and Teesside are wholly owned subsidiaries of the Company.
In January 1998, UK Holdings borrowed (Pounds)75.0 million under the UK
Holdings Credit Facility. Of this initial borrowing, (Pounds)50.4 million was
paid to the Company as a dividend and (Pounds)17.8 million was used to fund
capital expenditures and working capital requirements at Cambridge Cable and
Teesside. Final maturity of the UK Holdings Credit Facility is January 31,
2001. The UK Holdings Credit Facility bears interest at a rate per annum
F-62
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
QUARTER ENDED MARCH 31, 1998
equal to the London Interbank Official Rate ("LIBOR") plus 1/2% to 2 1/4%. As
of March 31, 1998 the Company's effective weighted average interest rate on
the UK Holdings Credit Facility was 9.47%.
The consummation of the NTL Transaction will result in a change in control,
as defined in the UK Holdings Credit Facility. Upon a change in control, all
amounts outstanding under the UK Holdings Credit Facility will become
immediately due and payable.
5. RELATED PARTY TRANSACTIONS
Comcast U.K. Consulting, Inc., a wholly owned subsidiary of the Company,
earns consulting fee income under consulting agreements with the Equity
Investees. The consulting fee income is generally based on a percentage of
gross revenues or a fixed amount per dwelling unit in the Equity Investees'
franchise areas.
The Company's right to receive consulting fee payments from the Equity
Investees has been subordinated to the banks under their credit facilities.
Accordingly, these fees have been classified as long-term receivables and are
included in investments in affiliates in the Company's condensed consolidated
balance sheet. In addition, the Company's shares in Cable London have been
pledged to secure amounts outstanding under Cable London's revolving credit
facility.
Management fee expense is incurred under agreements between the Company on
the one hand, and Comcast, the Company's controlling shareholder, and Comcast
UK Cable Partners Consulting, Inc. ("Comcast Consulting"), an indirect wholly
owned subsidiary of Comcast, on the other, whereby Comcast and Comcast
Consulting provide consulting services to the Equity Investees on behalf of
the Company and management services to the Company. Such management fees are
based on Comcast's and Comcast Consulting's cost of providing such services.
As of March 31, 1998 and December 31, 1997, due to affiliates consists
primarily of this management fee and operating expenses paid by Comcast and
its affiliates on behalf of the Company.
For the three months ended March 31, 1998 and 1997, investment income
includes (Pounds)694,000 and (Pounds)529,000 of interest income, respectively,
relating to the loans to the Equity Investees.
Long-term debt due to shareholder consists of 9% Subordinated Notes payable
to Holdings which are due in September 1999. For the three months ended March
31, 1998 and 1997, the Company recorded (Pounds)245,000 and (Pounds)224,000,
respectively, of interest expenses relating to such notes.
In management's opinion, the foregoing transactions were entered into on
terms no more or less favorable than those with non-affiliated parties.
6. CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect
the financial position, results of operations or liquidity of the Company.
7. STATEMENT OF CASH FLOWS--SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of (Pounds)1.6 million and
(Pounds)135,000 during the three months ended March 31, 1998 and 1997,
respectively.
The Company's wholly owned subsidiaries incurred capital lease obligations
of (Pounds)1.3 million during the three months ended March 31, 1998.
F-63
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Birmingham Cable Corporation Limited
We have audited the accompanying consolidated balance sheet of Birmingham
Cable Corporation Limited (a company incorporated in the United Kingdom) and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity and of cash flows for each of
the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Birmingham Cable Corporation
Limited and subsidiaries as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1997 in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche
Birmingham, England
February 27, 1998 (March 16, 1998 as to Note 3)
F-64
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN (Pounds)000'S, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................. (Pounds) 2,254 (Pounds) 7,689
Restricted cash............................ 53,000
Accounts receivable, less allowance for
doubtful accounts of (Pounds)4,834 and
(Pounds)2,360............................. 6,326 4,809
Interest receivable........................ 2,016
Other current assets....................... 2,844 3,017
--------------- ---------------
Total current assets..................... 11,424 70,531
--------------- ---------------
RESTRICTED CASH.............................. 22,000
--------------- ---------------
PROPERTY AND EQUIPMENT....................... 310,111 269,665
Accumulated depreciation................... (74,214) (49,961)
--------------- ---------------
Property and equipment, net................ 235,897 219,704
--------------- ---------------
DEFERRED CHARGES............................. 18,112 16,890
Accumulated amortization................... (5,398) (3,479)
--------------- ---------------
Deferred charges, net...................... 12,714 13,411
--------------- ---------------
(Pounds)260,035 (Pounds)325,646
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses...... (Pounds) 18,997 (Pounds) 24,381
Accrued interest........................... 1,611 7,398
Current portion of capital lease
obligations............................... 1,685 1,849
--------------- ---------------
Total current liabilities................ 22,293 33,628
--------------- ---------------
LONG-TERM DEBT............................... 140,000
--------------- ---------------
CAPITAL LEASE OBLIGATIONS, less current
portion..................................... 13,539 11,625
--------------- ---------------
LONG-TERM DEBT, due to shareholders.......... 7,492
--------------- ---------------
OTHER LIABILITIES............................ 4,382 2,238
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
PREFERENCE SHARES............................ 175,000
--------------- ---------------
SHAREHOLDERS' EQUITY.........................
Ordinary shares, (Pounds)1.00 par value--
authorized, 60,000,000 shares; issued,
51,073,486................................ 51,073 51,073
Additional capital......................... 112,399 112,399
Accumulated deficit........................ (91,143) (60,317)
--------------- ---------------
Total shareholders' equity............... 72,329 103,155
--------------- ---------------
(Pounds)260,035 (Pounds)325,646
=============== ===============
</TABLE>
See notes to consolidated financial statements.
F-65
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN (Pounds)000'S)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
SERVICE INCOME.............. (Pounds) 67,166 (Pounds) 52,472 (Pounds) 39,004
--------------- --------------- ---------------
COSTS AND EXPENSES
Operating................. 28,942 20,912 16,358
Selling, general and
administrative........... 27,622 23,564 19,536
Depreciation and
amortization............. 26,427 19,690 14,455
--------------- --------------- ---------------
82,991 64,166 50,349
--------------- --------------- ---------------
OPERATING LOSS.............. (15,825) (11,694) (11,345)
INTEREST EXPENSE............ 17,500 17,202 13,993
INVESTMENT INCOME........... (2,499) (8,518) (11,059)
--------------- --------------- ---------------
NET LOSS.................... (Pounds)(30,826) (Pounds)(20,378) (Pounds)(14,279)
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
F-66
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN (Pounds)000'S)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................. (Pounds)(30,826) (Pounds)(20,378) (Pounds)(14,279)
Adjustments to reconcile
net loss to net cash
(used in) provided by
operating activities:
Depreciation and
amortization........... 26,427 19,690 14,455
Non-cash interest
expense................ 492
--------------- --------------- ---------------
(3,907) (688) 176
Decrease (increase) in
accounts receivable,
interest receivable and
other current assets... 672 4,939 (7,438)
(Decrease) increase in
accounts payable and
accrued expenses,
accrued interest and
other liabilities...... (9,027) 10,559 6,469
--------------- --------------- ---------------
Net cash (used in)
provided by operating
activities........... (12,262) 14,810 (793)
--------------- --------------- ---------------
FINANCING ACTIVITIES
Proceeds from borrowings.. 140,000 175,000
Loans from shareholders... 7,000
Debt acquisition costs.... (2,977)
Redemption of preference
shares................... (175,000)
Repayment of capital
leases................... (2,316) (1,161) (220)
--------------- --------------- ---------------
Net cash (used in)
provided by financing
activities........... (30,316) (1,161) 171,803
--------------- --------------- ---------------
INVESTING ACTIVITIES
Restricted cash........... 75,000 39,000 (114,000)
Capital expenditures...... (36,635) (56,492) (47,999)
Deferred charges.......... (1,222) (991) (601)
--------------- --------------- ---------------
Net cash provided by
(used in) investing
activities........... 37,143 (18,483) (162,600)
--------------- --------------- ---------------
(DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS....... (5,435) (4,834) 8,410
CASH AND CASH EQUIVALENTS,
beginning of year.......... 7,689 12,523 4,113
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS,
end of year................ (Pounds) 2,254 (Pounds) 7,689 (Pounds) 12,523
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
F-67
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN (Pounds)000'S)
<TABLE>
<CAPTION>
ORDINARY ADDITIONAL ACCUMULATED
SHARES CAPITAL DEFICIT TOTAL
-------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1995................... (Pounds)51,073 (Pounds)112,399 (Pounds)(25,660) (Pounds)137,812
Net loss.............. (14,279) (14,279)
-------------- --------------- --------------- ---------------
BALANCE, DECEMBER 31,
1995................... 51,073 112,399 (39,939) 123,533
Net loss.............. (20,378) (20,378)
-------------- --------------- --------------- ---------------
BALANCE, DECEMBER 31,
1996................... 51,073 112,399 (60,317) 103,155
Net loss.............. (30,826) (30,826)
-------------- --------------- --------------- ---------------
BALANCE, DECEMBER 31,
1997................... (Pounds)51,073 (Pounds)112,399 (Pounds)(91,143) (Pounds) 72,329
============== =============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
F-68
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. BUSINESS
Birmingham Cable Corporation Limited, a company incorporated in the United
Kingdom ("UK"), and subsidiaries (the "Company") is principally engaged in the
development, construction, management and operation of cable
telecommunications systems. The Company holds two franchises in
Birmingham/Solihull and Wythall, England.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Company maintains its books and records in accordance with accounting
principles generally accepted in the UK. The consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
as practiced in the United States ("US") and are stated in UK pounds sterling
("UK Pound"). There were no significant differences between accounting
principles followed for UK purposes and generally accepted accounting
principles practiced in the US. The UK Pound exchange rate as of December 31,
1997 and 1996 was US $1.65 and US $1.71, respectively.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and all wholly owned subsidiaries. All significant intercompany accounts and
transactions among the consolidated entities have been eliminated.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Values
The estimated fair value amounts presented in these notes to consolidated
financial statements have been determined by the Company using available
market information and appropriate methodologies. However, considerable
judgment is required in interpreting market data to develop the estimates of
fair value. The estimates presented herein are not necessarily indicative of
the amounts that the Company could realize in a current market exchange. The
use of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts. Such fair value estimates
are based on pertinent information available to management as of December 31,
1997 and 1996, and have not been comprehensively revalued for purposes of
these consolidated financial statements since such dates.
Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash as of December 31, 1996 included
cash held on deposit as part of a (Pounds)175.0 million financing arrangement
entered into by the Company in 1995. In July 1997 this arrangement was
restructured and the restricted cash was used, together with proceeds from the
Birmingham Facility, to redeem the preference shares (see Note 3).
F-69
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Prematurity Period
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable telecommunications systems under the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 51,
"Financial Reporting by Cable Television Companies."
Under SFAS No. 51, during the period while the systems are partially under
construction and partially in service (the "Prematurity Period"), costs of
cable telecommunications plant, including materials, direct labor and
construction overhead are capitalized. Subscriber-related costs and general
and administrative costs are expensed as incurred. Costs incurred in
anticipation of servicing a fully operating system that will not vary
regardless of the number of subscribers are partially expensed and partially
capitalized, based upon the percentage of average actual or estimated
subscribers, whichever is greater, to the total number of subscribers expected
at the end of the Prematurity Period (the "Fraction").
During the Prematurity Period, depreciation and amortization of system
assets is determined by multiplying the depreciation and amortization of the
total capitalized system assets expected at the end of the Prematurity Period
by the Fraction. At the end of the Prematurity Period, depreciation and
amortization of system assets is based on the remaining undepreciated cost at
that date.
As of December 31, 1997, all of the Company's seven discrete build areas
have completed their Prematurity Period.
Property and Equipment
Property and equipment, which consists principally of system assets, is
shown at historical cost less accumulated depreciation. Improvements that
extend asset lives are capitalized; other repairs and maintenance charges are
expensed as incurred. The cost and related accumulated depreciation applicable
to assets sold or retired are removed from the accounts and the gain or loss
on disposition is recognized as a component of depreciation expense.
System assets
Prior to the Prematurity Period, no depreciation is provided on system
assets. During the Prematurity Period, depreciation is provided in accordance
with SFAS No. 51.
Depreciation of system assets is provided by the straight-line method over
estimated useful lives as follows:
<TABLE>
<S> <C>
Plant........................................................ 15-40 years
Network...................................................... 15 years
Subscriber equipment......................................... 6-10 years
Switch....................................................... 10 years
Computers.................................................... 4 years
</TABLE>
F-70
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Non-system assets
Depreciation of non-system assets is provided by the straight-line method
over estimated useful lives as follows:
<TABLE>
<S> <C>
Buildings.................................................. 40 years
Leasehold buildings........................................ term of lease
Fixtures, fittings and equipment........................... 5 years
Computers.................................................. 4 years
Vehicles................................................... 4 years
</TABLE>
Leased Assets
Assets held under capital leases are treated as if they had been purchased
outright and the corresponding liability is included in capital lease
obligations. Capital lease payments include principal and interest, with the
interest portion being expensed. Payments on operating leases are expensed on
a straight-line basis over the lease term.
Deferred Charges
Deferred charges consist primarily of franchise acquisition and development
costs directly attributable to obtaining, developing and maintaining the
franchise licenses. Franchise acquisition and development costs have been
allocated evenly between each build area and are amortized, by build area, on
a straight-line basis, over the lives of the franchises of 15 to 23 years.
Valuation of Long-Lived Assets
The Company periodically evaluates the recoverability of its long-lived
assets, including property and equipment and deferred charges, using objective
methodologies. Such methodologies include evaluations based on the cash flows
generated by the underlying assets or other determinants of fair value.
Revenue Recognition
Service income is recognized as service is provided. Credit risk is managed
by disconnecting services to subscribers who are delinquent.
Income Taxes
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities and expected benefits of utilizing net
operating loss carryforwards. The impact on deferred taxes of changes in tax
rates and laws, if any, applied to the years during which temporary
differences are expected to be settled, are reflected in the financial
statements in the period of enactment.
Derivative Financial Instruments
The Company uses interest rate exchange agreements ("Swaps"), to manage its
exposure to fluctuations in interest rates. Swaps are matched with either
fixed or variable rate debt and periodic cash payments are accrued on a
settlement basis as an adjustment to interest expense.
F-71
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Those instruments that have been entered into by the Company to hedge
exposure to interest rate risks are periodically examined by the Company to
ensure that the instruments are matched with underlying liabilities, reduce
the Company's risks relating to interest rates and, through market value and
sensitivity analysis, maintain a high correlation to the interest expense or
underlying value of the hedged item.
The Company does not hold or issue any derivative financial instruments for
trading purposes and is not a party to any leveraged instruments (see Note 3).
The credit risks associated with the Company's derivative financial
instruments are controlled through the evaluation and monitoring of the
creditworthiness of the counterparties. Although the Company may be exposed to
losses in the event of nonperformance by the counterparties, the Company does
not expect such losses, if any, to be significant.
Reclassifications
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to those classifications used in 1997.
3. LONG-TERM DEBT AND PREFERENCE SHARES
In February 1995, a subsidiary of the Company issued 175,000 cumulative
(Pounds)1.00 redeemable five year term preference shares for a paid up value
of (Pounds)175.0 million. Also in February 1995, the Company entered into a
(Pounds)175.0 million five year revolving credit facility (the "Birmingham
Facility") which provided for conversion into a five year term loan on March
31, 2000. In March 1997, the terms of the Birmingham Facility were amended to
extend the maturity of the term loan to December 31, 2005 and to amend the
required cash flow levels (as defined) and certain other terms. Interest rates
on the Birmingham Facility are at the London Interbank Offered Rate ("LIBOR")
plus 5/8% to 2 1/4%.
In July 1997, the preference shareholder exercised its option to require the
Company to purchase its shareholding. The Company funded the redemption of the
preference shares with the proceeds from the Birmingham Facility and
restricted cash and settled its five year (Pounds)175.0 million interest rate
exchange agreement with Barclays Bank PLC. The balance of the Birmingham
Facility will be used, subject to certain restrictions, for capital
expenditures and working capital requirements relating to the build-out of its
systems. The preference shares had an effective dividend rate, including
Advanced Corporation Tax ("ACT"), of 8.00%.
The Birmingham Facility contains restrictive covenants which limit the
Company's ability to enter into arrangements for the acquisition and sale of
property and equipment, investments, mergers and the incurrence of additional
debt. Certain of these covenants require that certain minimum build
requirements, financial ratios and cash flow levels be maintained and contain
restrictions on dividend payments. The Company's three principal shareholders'
right to receive consulting fee payments from the Company has been
subordinated to the banks under the Birmingham Facility. The payment of
consulting fees is restricted until the Company meets certain financial ratio
tests under the Birmingham Facility. The Company has pledged the shares of its
material subsidiaries to secure the Birmingham Facility. Upon a change of
control, all amounts due under the Birmingham Facility become immediately due
and payable. On February 4, 1998, Comcast UK Cable Partners Limited ("Comcast
UK"), one the Company's principal shareholders, entered into a definitive
agreement to amalgamate (the "NTL Transaction") with a wholly owned subsidiary
of NTL Incorporated. The consummation of the NTL Transaction will not result
in a change of control as defined in the Birmingham Facility.
The Company enters into Swaps as a normal part of its risk management
efforts to limit its exposure to adverse fluctuations in interest rates. Using
Swaps, the Company agrees to exchange, at specified intervals, the
F-72
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
difference between fixed and variable interest amounts calculated by reference
to an agreed upon notional amount. In conjunction with the Birmingham
Facility, a subsidiary of the Company and Barclays Bank PLC entered into a
five year (Pounds)175.0 million Swap, whereby the subsidiary receives fixed
interest at a rate of 8.83% and pays floating rate interest at the six month
LIBOR. The (Pounds)175.0 million Swap was settled in July 1997 along with the
redemption of the preference shares (see above). In addition, a subsidiary of
the Company entered into a second series of five year Swaps with three banks.
Under the agreements, the subsidiary pays fixed rate interest at 9.20% and
receives floating rate interest at six month LIBOR, based upon the outstanding
notional amount of the Swaps. As of December 31, 1997 and 1996, the notional
amount outstanding on the second series of Swaps was (Pounds)149.0 million and
(Pounds)106.0 million, respectively, and increased to (Pounds)160.0 million on
January 2, 1998. The notional amounts of interest rate agreements are used to
measure interest to be paid or received and do not represent the amount of
exposure to credit loss. While Swaps represent an integral part of the
Company's interest rate risk management program, their incremental effect on
interest expense for the years ended December 31, 1997, 1996 and 1995 was not
significant. The estimated amount to settle the Company's Swaps was a
liability of (Pounds)7.5 million and a receivable of (Pounds)168,000 as of
December 31, 1997 and 1996, respectively.
On March 16, 1998, the Company's shareholders loaned (Pounds)7.0 million to
the Company in the form of Junior Subordinated Debt, as defined in the
Birmingham Facility. The proceeds from this borrowing were used to settle the
Swaps described above. Additionally, on March 16, 1998 a subsidiary of the
Company entered into a (Pounds)160.0 million notional amount two year Swap
with three banks. Under the terms of this Swap, the subsidiary pays fixed rate
interest at 7.23% and receives floating rate interest at six month LIBOR,
based upon the notional amount.
Maturities of long-term debt outstanding as of December 31, 1997 for the
four years after 1998 are as follows ((Pounds)000's):
<TABLE>
<S> <C>
1999......................................................... (Pounds)
2000......................................................... 7,000
2001......................................................... 14,000
2002......................................................... 21,000
</TABLE>
The differences between the carrying amounts and estimated fair value of the
Company's long-term debt was not significant as of December 31, 1997 and 1996.
Interest rates that are currently available to the Company for debt with
similar terms and remaining maturities are used to estimate fair value for
debt issues for which quoted market prices are not available.
4. LONG-TERM DEBT, DUE TO SHAREHOLDERS
As of December 31, 1997, the Company had outstanding loans from shareholders
of (Pounds)7.0 million and accrued interest thereon of (Pounds)492,000. The
loans from shareholders bear interest at a fixed rate of 7.8% and are payable
on demand. Under the terms of the Birmingham Facility, however, principal and
interest on the loans from shareholders cannot be paid until the Birmingham
Facility is repaid. Thus, the loans from shareholders and accrued interest
thereon have been classified as long-term in the Company's consolidated
balance sheet. A reasonable estimate of the fair value of the loans from
shareholders is not practicable to obtain because of the related party nature
of these items and the lack of quoted market prices.
5. RELATED PARTY TRANSACTIONS
The Company has consulting agreements with Comcast U.K. Consulting, Inc.
("Comcast Consulting") and Telewest Communications Group Ltd., subsidiaries of
two of the Company's principal shareholders, Comcast
F-73
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
UK and Telewest Communications plc ("Telewest"), respectively. The Company
also has a consulting agreement with General Cable, the Company's other
principal shareholder. The Company pays a fee to Telewest each year as a
contribution to the operating expenses and capital expenditures of Telewest's
Network Service Center, which provides telephony support to the Company. The
Company has a telephony interconnect agreement with Telewest, whereby certain
telephony traffic is routed via Telewest. These interconnect costs are
included in "other" below.
A summary of related party charges included in the Company's consolidated
financial statements is as follows (in (Pounds)000's):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Consulting fees................. (Pounds)1,511 (Pounds)1,326 (Pounds)1,070
Network Service Center fees..... 711 814 680
Other........................... 1,151 109 6
------------- ------------- -------------
(Pounds)3,373 (Pounds)2,249 (Pounds)1,756
============= ============= =============
</TABLE>
As of December 31, 1997 and 1996, accounts payable and accrued expenses
include (Pounds)1.4 million and (Pounds)2.3 million, respectively, payable to
the Company's three principal shareholders, principally for consulting fees
and normal operating expenses paid by the shareholders and their affiliates on
behalf of the Company. As of December 31, 1997 and 1996, other long-term
liabilities includes (Pounds)3.9 million and (Pounds)1.3 million,
respectively, of consulting fees payable to the Company's three principal
shareholders as payment is restricted under the Birmingham Facility.
In management's opinion, the foregoing transactions were entered into on
terms no more or less favorable than those with non-affiliated third parties.
6. INCOME TAXES
The Company has a deferred tax asset arising from the carryforward of net
operating losses and the differences between the book and tax basis of
property. However, a valuation allowance has been recorded to fully reserve
the deferred tax asset as its realization is uncertain.
Significant components of the Company's deferred income taxes are as follows
(in (Pounds)000's):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------
1997 1996
------------- -------------
<S> <C> <C> <C>
Net operating loss carryforwards
(carried forward indefinitely)......... (Pounds)3,253 (Pounds)3,218
Differences between book and tax basis
of property............................ 7,880 6,916
Less: Valuation allowance............... (11,133) (10,134)
------------- -------------
(Pounds) (Pounds)
============= =============
</TABLE>
In connection with the Birmingham Facility and the related preference share
arrangement (see Note 3), the Company is obligated to pay ACT on all
preference share dividends. Related ACT for 1997, 1996 and 1995 was
(Pounds)1.4 million, (Pounds)2.8 million and (Pounds)2.5 million,
respectively, and has been classified as a component of interest expense in
the Company's consolidated statement of operations. ACT may be carried forward
indefinitely to offset potential future tax liabilities of the Company.
F-74
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
7. STATEMENT OF CASH FLOWS--SUPPLEMENTAL INFORMATION
The Company made cash payments for interest and preferred stock dividends of
approximately (Pounds)43.0 million, (Pounds)31.2 million and (Pounds)11.3
million during the years ended December 31, 1997, 1996 and 1995, respectively.
The Company incurred capital lease obligations of (Pounds)4.1 million,
(Pounds)5.0 million and (Pounds)4.6 million during the years ended December
31, 1997, 1996 and 1995, respectively.
8. COMMITMENTS AND CONTINGENCIES
Certain of the Company's facilities and equipment are held under operating
or capital leases which expire through 2007.
A summary of assets held under capital leases are as follows (in
(Pounds)000's):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
System, fixtures, fittings, equipment and
vehicles................................. (Pounds)18,991 (Pounds)14,925
Less: Accumulated depreciation............ (5,779) (3,556)
-------------- --------------
(Pounds)13,212 (Pounds)11,369
============== ==============
</TABLE>
Future minimum rental payments under lease commitments with an initial or
remaining term of more than one year as of December 31, 1997 are as follows
(in (Pounds)000's):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------------- -------------
<S> <C> <C>
1998......................................... (Pounds) 2,699 (Pounds) 156
1999......................................... 2,801 156
2000......................................... 2,778 156
2001......................................... 2,300 157
2002......................................... 1,719 154
Thereafter................................... 7,710 1,805
-------------- -------------
Total minimum rental commitments............. 20,007 (Pounds)2,584
=============
Less: Amount representing interest........... (4,783)
--------------
Present value of minimum rental commitments.. 15,224
Less: Current portion of capital lease
obligations................................. (1,685)
--------------
Long-term portion of capital lease
obligations................................. (Pounds)13,539
==============
</TABLE>
Operating lease expense for the years ended December 31, 1997, 1996 and 1995
was (Pounds)169,000, (Pounds)428,000 and (Pounds)947,000, respectively.
Included within accounts payable and accrued expenses and other long-term
liabilities as of December 31, 1997 and 1996 is (Pounds)570,000 and
(Pounds)665,000, respectively, which represents the obligation incurred by the
Company in connection with the termination of a contractual obligation under
an agreement with the local authority to service and maintain the Company's
satellite master antenna television installations in the franchise area. This
liability is noninterest bearing and will be discharged by the payment of
(Pounds)95,000 annually through 2003. The effect of discounting the liability
is not significant to the Company's financial position or results of
operations.
F-75
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Cable London PLC
We have audited the accompanying consolidated balance sheet of Cable London
PLC (a company incorporated in the United Kingdom) and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, shareholders' (deficiency) equity and of cash flows for each of
the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Cable London PLC and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche
London, England
February 27, 1998
F-76
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN (Pounds)000'S, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS...............................
Cash....................................... (Pounds) 2,718 (Pounds) 3,213
Accounts receivable, less allowance for
doubtful accounts of (Pounds)1,762 and
(Pounds)1,465............................. 4,792 3,670
Other current assets....................... 2,830 3,334
--------------- ---------------
Total current assets..................... 10,340 10,217
--------------- ---------------
PROPERTY AND EQUIPMENT....................... 235,786 192,630
Accumulated depreciation................... (55,292) (36,480)
--------------- ---------------
Property and equipment, net................ 180,494 156,150
--------------- ---------------
DEFERRED CHARGES............................. 8,073 6,986
Accumulated amortization................... (3,214) (3,230)
--------------- ---------------
Deferred charges, net...................... 4,859 3,756
--------------- ---------------
(Pounds)195,693 (Pounds)170,123
=============== ===============
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY)
EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses...... (Pounds) 19,972 (Pounds) 21,705
Other current liabilities.................. 2,172 3,117
Current portion of long-term debt and
capital lease obligations................. 758 60,361
--------------- ---------------
Total current liabilities................ 22,902 85,183
--------------- ---------------
LONG-TERM DEBT, less current portion......... 89,727 718
--------------- ---------------
CAPITAL LEASE OBLIGATIONS, less current
portion..................................... 11,751 7,869
--------------- ---------------
CONVERTIBLE DEBT AND LOANS FROM
SHAREHOLDERS................................ 69,017 52,244
--------------- ---------------
OTHER LIABILITIES............................ 2,543
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (DEFICIENCY) EQUITY
Ordinary shares, (Pounds).10 par value--
authorized, 100,000,000 shares; issued,
55,572,916 and 55,125,690................. 5,557 5,513
Additional capital......................... 97,254 96,486
Accumulated deficit........................ (103,058) (77,890)
--------------- ---------------
Total shareholders' (deficiency) equity.. (247) 24,109
--------------- ---------------
(Pounds)195,693 (Pounds)170,123
=============== ===============
</TABLE>
See notes to consolidated financial statements.
F-77
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN (Pounds)000'S)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
SERVICE INCOME.............. (Pounds) 52,816 (Pounds) 40,091 (Pounds) 30,277
--------------- --------------- ---------------
COSTS AND EXPENSES
Operating................. 22,084 17,978 14,622
Selling, general and
administrative........... 23,703 21,157 18,616
Depreciation and
amortization............. 19,740 14,862 10,847
--------------- --------------- ---------------
65,527 53,997 44,085
--------------- --------------- ---------------
OPERATING LOSS.............. (12,711) (13,906) (13,808)
INTEREST EXPENSE............ 12,692 7,556 4,133
INVESTMENT INCOME........... (235) (221) (266)
--------------- --------------- ---------------
NET LOSS.................... (Pounds)(25,168) (Pounds)(21,241) (Pounds)(17,675)
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
F-78
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN (Pounds)000'S)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................. (Pounds)(25,168) (Pounds)(21,241) (Pounds)(17,675)
Adjustments to reconcile
net loss to net cash
(used in) provided by
operating activities:
Depreciation and
amortization........... 19,740 14,862 10,847
Non-cash interest
expense................ 4,773 3,355 3,311
--------------- --------------- ---------------
(655) (3,024) (3,517)
Increase in accounts
receivable and other
current assets......... (618) (2,428) (214)
(Decrease) increase in
accounts payable and
accrued expenses, other
current liabilities and
other liabilities...... (135) 7,508 3,992
--------------- --------------- ---------------
Net cash (used in)
provided by operating
activities........... (1,408) 2,056 261
--------------- --------------- ---------------
FINANCING ACTIVITIES
Proceeds from borrowings.. 94,029 40,000 38,000
Debt acquisition costs.... (1,704) (493)
Loans from shareholders... 12,000 3,000
Repayments of debt........ (65,031) (33) (30)
Repayment of capital
leases................... (537) (21)
Issuances of shares....... 812
--------------- --------------- ---------------
Net cash provided by
financing
activities........... 39,569 42,946 37,477
--------------- --------------- ---------------
INVESTING ACTIVITIES
Capital expenditures...... (38,656) (46,082) (36,780)
Deferred charges and
other.................... (834)
--------------- --------------- ---------------
Net cash used in
investing
activities........... (38,656) (46,082) (37,614)
--------------- --------------- ---------------
(DECREASE) INCREASE IN
CASH....................... (495) (1,080) 124
CASH, beginning of year..... 3,213 4,293 4,169
--------------- --------------- ---------------
CASH, end of year........... (Pounds) 2,718 (Pounds) 3,213 (Pounds) 4,293
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
F-79
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIENCY) EQUITY
(IN (Pounds)000'S)
<TABLE>
<CAPTION>
ORDINARY ADDITIONAL ACCUMULATED
SHARES CAPITAL DEFICIT TOTAL
------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1995................... (Pounds)5,513 (Pounds)96,486 (Pounds) (38,974) (Pounds)63,025
Net loss.............. (17,675) (17,675)
------------- -------------- ---------------- --------------
BALANCE, DECEMBER 31,
1995................... 5,513 96,486 (56,649) 45,350
Net loss.............. (21,241) (21,241)
------------- -------------- ---------------- --------------
BALANCE, DECEMBER 31,
1996................... 5,513 96,486 (77,890) 24,109
Shares issued......... 44 768 812
Net loss.............. (25,168) (25,168)
------------- -------------- ---------------- --------------
BALANCE, DECEMBER 31,
1997................... (Pounds)5,557 (Pounds)97,254 (Pounds)(103,058) (Pounds) (247)
============= ============== ================ ==============
</TABLE>
See notes to consolidated financial statements.
F-80
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. BUSINESS
Cable London PLC, a company incorporated in the United Kingdom ("UK"), and
subsidiaries (the "Company") is principally engaged in the development,
construction, management and operation of cable telecommunications systems.
The Company holds four franchises covering Camden, Haringey, Hackney/
Islington and Enfield, England.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Company maintains its books and records in accordance with accounting
principles generally accepted in the UK. The consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
as practiced in the United States ("US") and are stated in UK pounds sterling
("UK Pound"). There were no significant differences between accounting
principles followed for UK purposes and generally accepted accounting
principles practiced in the US. The UK Pound exchange rate as of December 31,
1997 and 1996 was US $1.65 and US $1.71, respectively.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and all wholly owned subsidiaries. All significant intercompany accounts and
transactions among the consolidated entities have been eliminated.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Values
The estimated fair value amounts presented in these notes to consolidated
financial statements have been determined by the Company using available
market information and appropriate methodologies. However, considerable
judgment is required in interpreting market data to develop the estimates of
fair value. The estimates presented herein are not necessarily indicative of
the amounts that the Company could realize in a current market exchange. The
use of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts. Such fair value estimates
are based on pertinent information available to management as of December 31,
1997 and 1996, and have not been comprehensively revalued for purposes of
these consolidated financial statements since such dates.
Prematurity Period
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable telecommunications systems under the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 51,
"Financial Reporting by Cable Television Companies."
Under SFAS No. 51, during the period while the systems are partially under
construction and partially in service (the "Prematurity Period"), costs of
cable telecommunications plant, including materials, direct labor
F-81
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
and construction overhead are capitalized. Subscriber-related costs and
general and administrative costs are expensed as incurred. Costs incurred in
anticipation of servicing a fully operating system that will not vary
regardless of the number of subscribers are partially expensed and partially
capitalized, based on the percentage of average actual or estimated
subscribers, whichever is greater, to the total number of subscribers expected
at the end of the Prematurity Period (the "Fraction").
During the Prematurity Period, depreciation and amortization of system
assets is determined by multiplying the depreciation and amortization of the
total capitalized system assets expected at the end of the Prematurity Period
by the Fraction. At the end of the Prematurity Period, depreciation and
amortization of system assets is based on the remaining undepreciated cost at
that date.
As of December 31, 1997, three of the Company's four franchise areas have
completed their Prematurity Period. The remaining Prematurity Period is
expected to terminate in 1998.
Property and Equipment
Property and equipment, which consists principally of system assets, is
shown at historical cost less accumulated depreciation. Improvements that
extend asset lives are capitalized; other repairs and maintenance charges are
expensed as incurred. The cost and related accumulated depreciation applicable
to assets sold or retired are removed from the accounts and the gain or loss
on disposition is recognized as a component of depreciation expense.
System assets
Prior to the Prematurity Period, no depreciation is provided on system
assets. During the Prematurity Period, depreciation is provided in accordance
with SFAS No. 51.
Depreciation of system assets is provided by the straight-line method over
estimated useful lives as follows:
<TABLE>
<S> <C>
Plant......................................................... 40 years
Network....................................................... 15 years
Subscriber equipment.......................................... 6-8 years
Switch........................................................ 10 years
Computers..................................................... 4 years
</TABLE>
Non-system assets
Depreciation of non-system assets is provided by the straight-line method
over estimated useful lives as follows:
<TABLE>
<S> <C>
Leased buildings............................................... 40 years
Fixtures, fittings and equipment............................... 5 years
Computers...................................................... 4 years
Vehicles....................................................... 3 years
</TABLE>
Leased Assets
Assets held under capital leases are treated as if they had been purchased
outright and the corresponding liability is included in capital lease
obligations. Capital lease payments include principal and interest, with the
F-82
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
interest portion being expensed. Payments on operating leases are expensed on
a straight-line basis over the lease term.
Deferred Charges
Deferred charges consist primarily of franchise acquisition and development
costs directly attributable to obtaining, developing and maintaining the
franchise licenses and debt acquisition costs incurred by the Company in
entering into the London Revolver (see Note 3). Franchise acquisition and
development costs are being amortized on a straight-line basis over periods
from two to fifteen years. Debt acquisition costs are being amortized on a
straight-line basis over the term of the London Revolver of nine years.
Valuation of Long-Lived Assets
The Company periodically evaluates the recoverability of its long-lived
assets, including property and equipment and deferred charges, using objective
methodologies. Such methodologies include evaluations based on the cash flows
generated by the underlying assets or other determinants of fair value.
Revenue Recognition
Service income is recognized as service is provided. Credit risk is managed
by disconnecting services to subscribers who are delinquent.
Income Taxes
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities and expected benefits of utilizing net
operating loss carryforwards. The impact on deferred taxes of changes in tax
rates and laws, if any, applied to the years during which temporary
differences are expected to be settled, are reflected in the financial
statements in the period of enactment.
Derivative Financial Instruments
The Company uses derivative financial instruments, including interest rate
exchange agreements ("Swaps") and interest rate collar agreements ("Collars"),
to manage its exposure to fluctuations in interest rates.
Swaps and Collars are matched with either fixed or variable rate debt and
periodic cash payments are accrued on a settlement basis as an adjustment to
interest expense.
Those instruments that have been entered into by the Company to hedge
exposure to interest rate risks are periodically examined by the Company to
ensure that the instruments are matched with underlying liabilities, reduce
the Company's risks relating to interest rates and, through market value and
sensitivity analysis, maintain a high correlation to the interest expense or
underlying value of the hedged item.
The Company does not hold or issue any derivative financial instruments for
trading purposes and is not a party to leveraged instruments (see Note 3). The
credit risks associated with the Company's derivative financial instruments
are controlled through the evaluation and monitoring of the creditworthiness
of the counterparties. Although the Company may be exposed to losses in the
event of nonperformance by the counterparties, the Company does not expect
such losses, if any, to be significant.
F-83
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Reclassifications
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to those classifications used in 1997.
3. LONG-TERM DEBT
In June 1995, the Company entered into a (Pounds)60.0 million revolving
credit facility (the "London Facility") with various banks. The London
Facility had a two year term and an interest rate at the London Interbank
Offered Rate ("LIBOR") plus 2 1/2%. In April 1997, the amount available under
the London Facility was increased to (Pounds)65.0 million.
In May 1997, the Company entered into a (Pounds)170.0 million revolving
credit facility (the "London Revolver") with various banks, which converts
into a five year term loan on June 30, 2001. Interest rates on the London
Revolver are at LIBOR plus 1/2% to 2 3/8%. In May 1997, the Company repaid all
amounts outstanding under the London Facility with proceeds from borrowings
under the London Revolver. The balance of the London Revolver will be used,
subject to certain restrictions, for capital expenditures and working capital
requirements relating to the build-out of its systems.
The London Revolver contains restrictive covenants which limit the Company's
ability to enter into arrangements for the acquisition and sale of property
and equipment, investments, mergers and the incurrence of additional debt.
Certain of these covenants require that certain financial ratios and cash flow
levels be maintained and contain certain restrictions on dividend payments.
The Company's two principal shareholders' rights to receive consulting fee
payments from the Company has been subordinated to the banks under the London
Revolver. The payment of consulting fees is restricted until the Company meets
certain financial ratio tests under the London Revolver. In addition, the
Company's two principal shareholders' shares in the Company have been pledged
to secure the London Revolver. Upon a change of control, all amounts due under
the London Revolver become immediately due and payable. On February 4, 1998,
Comcast UK Cable Partners Limited ("Comcast UK"), one the Company's principal
shareholders, entered into a definitive agreement to amalgamate (the "NTL
Transaction") with a wholly owned subsidiary of NTL Incorporated. The
consummation of the NTL Transaction will not result in a change of control as
defined in the London Revolver.
The Company enters into Swaps and Collars as a normal part of its risk
management efforts to limit its exposure to adverse fluctuations in interest
rates. Using Swaps, the Company agrees to exchange, at specified intervals,
the difference between fixed and variable interest amounts calculated by
reference to an agreed upon notional amount. Collars limit the Company's
exposure to and benefits from interest rate fluctuations on variable rate debt
to within a certain range of interest rates. In June 1997, the Company entered
into a series of four year interest Swaps with three banks. Under the
agreements, the Company pays fixed rate interest at 7.34% and receives
floating rate interest at three month LIBOR, based upon the outstanding
notional amount of the Swaps. As of December 31, 1997, the notional amount
outstanding on the Swaps was (Pounds)44.5 million and increased to
(Pounds)49.5 million on January 7, 1998. Also in June 1997, the Company
entered into a Collar which limits the interest rate on the notional amount to
between 6% and 9%. As of December 31, 1997, the notional amount outstanding on
the Collar was (Pounds)22.3 million and increased to (Pounds)24.8 million on
January 7, 1998. The notional amounts of interest rate agreements and interest
rate collar agreements are used to measure interest to be paid or received and
do not represent the amount of exposure to credit loss. While Swaps and
Collars represent an integral part of the Company's interest rate risk
management program, their incremental effect on interest expense for the year
ended December 31, 1997 was not significant. The estimated amount to settle
the Company's Swaps and Collar was (Pounds)1.5 million as of December 31,
1997.
F-84
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Also included in long-term debt is a mortgage note payable with an
outstanding balance of (Pounds)753,000 and (Pounds)755,000 as of December 31,
1997 and 1996, respectively, payable in monthly installments through 2002
which is secured by property of the Company. The mortgage note bears interest
at a fixed rate of 9.79%.
Maturities of long-term debt outstanding as of December 31, 1997 for the
four years after 1998 are as follows ((Pounds)000's):
<TABLE>
<S> <C>
1999........................................................ (Pounds)
2000........................................................
2001........................................................ 2,225
2002........................................................ 8,900
</TABLE>
The differences between the carrying amounts and estimated fair value of the
Company's long-term debt was not significant as of December 31, 1997 and 1996.
Interest rates that are currently available to the Company for debt with
similar terms and remaining maturities are used to estimate fair value for
debt issues for which quoted market prices are not available.
4. CONVERTIBLE DEBT AND LOANS FROM SHAREHOLDERS
As of December 31, 1997 and 1996, the Company had outstanding convertible
debt due to shareholders of (Pounds)42.0 million and outstanding loans from
shareholders of (Pounds)15.0 million and (Pounds)3.0 million, respectively.
The convertible debt and loans from shareholders bear interest at 2% above the
base lending rate of Barclays Bank PLC (9.25% effective rate as of December
31, 1997) and are payable on demand. Accrued interest on the convertible debt
and loans from shareholders is (Pounds)12.0 million and (Pounds)7.2 million as
of December 31, 1997 and 1996, respectively. Under the terms of the London
Revolver, principal and interest on the convertible debt and loans from
shareholders cannot be paid until the London Revolver is repaid. Accordingly,
the convertible debt, loans from shareholders and accrued interest thereon has
been classified as long-term convertible debt and other in the Company's
consolidated balance sheet. The convertible debt, along with accrued interest
thereon, is convertible into the Company's ordinary shares at (Pounds)2.00 per
share. Interest expense on the convertible debt and loans from shareholders
was (Pounds)4.8 million, (Pounds)3.3 million and (Pounds)3.2 million during
the years ended December 31, 1997, 1996 and 1995, respectively. A reasonable
estimate of the convertible debt and loans from shareholders is not
practicable to obtain because of the related party nature of these items and
the lack of quoted market prices.
5. RELATED PARTY TRANSACTIONS
The Company has consulting agreements with Comcast U.K. Consulting, Inc.
("Comcast Consulting") and Telewest Communications Group Ltd., subsidiaries of
the Company's two principal shareholders, Comcast UK and Telewest
Communications plc ("Telewest"), respectively. The Company pays a fee to
Telewest each year as a contribution to the operating expenses and capital
expenditures of Telewest's Network Service Center, which provides telephony
support to the Company.
A summary of related party charges included in the Company's consolidated
financial statements is as follows (in (Pounds)000's):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Consulting fees................... (Pounds)1,077 (Pounds) 790 (Pounds) 962
Network Service Center fees....... 521 639 503
Other............................. 355 125 33
------------- ------------- -------------
(Pounds)1,953 (Pounds)1,554 (Pounds)1,498
============= ============= =============
</TABLE>
F-85
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
As of December 31, 1997 and 1996, accounts payable and accrued expenses
include (Pounds)176,000 million and (Pounds)1.6 million, respectively, payable
to the Company's two principal shareholders, principally for consulting fees
and normal operating expenses paid by the shareholders and their affiliates on
behalf of the Company. As of December 31, 1997 other long-term liabilities
includes (Pounds)2.5 million of consulting fees and interest payable to the
Company's two principal shareholders as payment is restricted under the London
Revolver.
In management's opinion, the foregoing transactions were entered into on
terms no more or less favorable than those with non-affiliated third parties.
6. INCOME TAXES
The Company has a deferred tax asset arising from the carryforward of net
operating losses and the differences between the book and tax basis of
property. However, a valuation allowance has been recorded to fully reserve
the deferred tax asset as its realization is uncertain.
Significant components of the Company's deferred income taxes are as follows
(in (Pounds)000's):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Net operating loss carryforwards (carried
forward indefinitely).................... (Pounds)17,692 (Pounds)15,852
Differences between book and tax basis of
property................................. 10,426 7,329
Other..................................... (459) (756)
Less: Valuation allowance................. (27,659) (22,425)
-------------- --------------
(Pounds) (Pounds)
============== ==============
</TABLE>
7. STATEMENT OF CASH FLOWS--SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of approximately (Pounds)7.4
million, (Pounds)3.7 million and (Pounds)691,000 during the years ended
December 31, 1997, 1996 and 1995, respectively.
The Company incurred capital lease obligations of (Pounds)4.8 million,
(Pounds)1.5 million and (Pounds)3.9 million during the years ended December
31, 1997, 1996 and 1995, respectively.
8. COMMITMENTS AND CONTINGENCIES
Certain of the Company's facilities and equipment are held under operating
or capital leases which expire through 2007.
A summary of assets held under capital leases are as follows (in
(Pounds)000's):
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1997 1996
-------------- -------------
<S> <C> <C>
System, fixtures, fittings, equipment and
vehicles.................................. (Pounds)13,040 (Pounds)8,219
Less: Accumulated depreciation............. (2,836) (1,523)
-------------- -------------
(Pounds)10,204 (Pounds)6,696
============== =============
</TABLE>
F-86
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Future minimum rental payments under lease commitments with an initial or
remaining term of more than one year as of December 31, 1997 are as follows
(in (Pounds)000's):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------------- -------------
<S> <C> <C>
1998......................................... (Pounds) 1,550 (Pounds) 902
1999......................................... 2,036 496
2000......................................... 2,078 181
2001......................................... 2,313 148
2002......................................... 1,457 146
Thereafter................................... 7,727 955
-------------- -------------
Total minimum rental commitments............. 17,161 (Pounds)2,828
=============
Less: Amount representing interest........... (4,678)
--------------
Present value of minimum rental commitments.. 12,483
Less: Current portion of capital lease
obligations................................. (732)
--------------
Long-term portion of capital lease
obligations................................. (Pounds)11,751
==============
</TABLE>
Operating lease expense for the years ended December 31, 1997, 1996 and 1995
was (Pounds)919,000, (Pounds)1.2 million and (Pounds)1.1 million,
respectively.
F-87
<PAGE>
PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY
NTL Incorporated
110 East 59th Street
New York, New York 10022
USA
EXCHANGE AGENT
In New York In Luxembourg
The Chase Manhattan Bank Chase Manhattan Bank Luxembourg
Corporate Trust--Securities Window S.A.
Room 234--North Building 5 Rue Plaetis
55 Water Street L-2338, Luxembourg
New York, New York 10041
USA
TRUSTEE, PRINCIPAL PAYING AGENT, TRANSFER AGENT AND REGISTRAR
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
USA
PAYING, TRANSFER AND LISTING AGENT
Banque Internationale a Luxembourg
69, route d'Esch
1-1470 Luxembourg
PAYING AGENT
The Chase Manhattan Bank
Trinity Tower
9 Thomas More Street
London E1 9YT
United Kingdom
LEGAL ADVISORS TO THE COMPANY
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
USA
AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
USA
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS
OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH SOLICITATION.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Prospectus Summary......................................................... 6
Risk Factors............................................................... 18
The Exchange Offer......................................................... 30
Use of Proceeds............................................................ 38
Exchange Rates............................................................. 38
Capitalization............................................................. 39
Selected Consolidated Financial Information................................ 40
Unaudited Pro Forma Financial Data......................................... 41
Description of Notes....................................................... 46
Registration Rights........................................................ 72
Description of Certain Indebtedness ....................................... 74
Certain Federal Income Tax
Considerations............................................................ 79
Plan of Distribution....................................................... 85
Book-Entry; Delivery and Form.............................................. 86
Legal Matters.............................................................. 90
Experts.................................................................... 90
Enforceability of Civil Liabilities........................................ 90
General Information........................................................ 91
Index to Financial Statements.............................................. F-1
</TABLE>
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) DEALERS
AFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN THE
EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS OBLIGATION IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF NTL
INCORPORATED]
NTL INCORPORATED
(Pounds)125,000,000
(Pounds)300,000,000 10 3/4% SERIES B SENIOR DEFERRED
COUPON NOTES DUE 2003
$1,300,000,000 9 3/4% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2003
---------------------------
PROSPECTUS
---------------------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 102 of the Delaware General Corporation Law (the
"DGCL"), the Company's Restated Certificate of Incorporation (the "Certificate
of Incorporation") eliminates a director's personal liability for monetary
damages to the Company and its stockholders arising from a breach or alleged
breach of a director's fiduciary duty except for liability under Section 174
of the DGCL or liability for a breach of the director's duty of loyalty to the
Company or its stockholders, for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law or for any
transaction in which the director derived an improper personal benefit. The
effect of this provision in the Certificate of Incorporation is to eliminate
the rights of the Company and its stockholders (through stockholders,
derivative suits on behalf of the Company) to recover monetary damages against
a director for breach of fiduciary duty as a director (including breaches
resulting from negligent or grossly negligent behavior) except in the
situations described above.
The Company's By-laws (the "By-laws") provide that directors and officers of
the Company shall be indemnified against liabilities arising from their
service as directors and officers to the full extent permitted by law. Section
145 of the DGCL empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 145 also empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person acted in any of
the capacities set forth above, against expenses (including attorney's fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards, except
that no indemnification may be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
corporation unless, and only to the extent that, the Court of Chancery or the
court in which such action was brought shall determine that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent that a director or officer
of a corporation has been successful in the defense of any action, suit or
proceeding referred to above or in the defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of
any other rights to which the indemnified party may be entitled; and that the
corporation is empowered to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liabilities under Section 145.
The Company has entered into a director and officer indemnity agreement
("Indemnity Agreement") with each officer and director of the Company (an
"Indemnitee"). Under the By-laws and these Indemnity Agreements, the Company
must indemnify an Indemnitee to the fullest extent permitted by the DGCL for
losses and expenses incurred in connection with actions in which the
Indemnitee is involved by reason of having been a director or officer of the
Company. The Company is also obligated to advance expenses an Indemnitee may
incur in connection with such actions before any resolution of the action.
II-1
<PAGE>
ITEM 21. EXHIBITS.
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 Purchase Agreement, dated March 6, 1998, by and among the Company
and Donaldson, Lufkin & Jenrette International, Donaldson, Lufkin
& Jenrette Securities Corporation, Morgan Stanley & Co.
International Limited, Morgan Stanley & Co. Incorporated, BT Alex.
Brown International, Division of Bankers Trust International PLC,
BT Alex. Brown Incorporated, Chase Securities Inc., Salomon
Brothers International Limited and Salomon Brothers Inc, with
respect to the Old Notes*
2.1 Amended and Restated Agreement of Reorganization and Plan of
Merger Agreement, dated as of May 28, 1993, by and between the
Company and OCOM(1)
2.2 Deed of Irrevocable undertaking dated March 28, 1996 by and among
Addroute Limited, certain shareholders in the NTL Group Limited,
NTL Group Limited and International CableTel Incorporated(7)
2.3 Form of Offer Document dated March 28, 1996 of Addroute Limited
for NTL Group Limited(7)
2.4 Deed of Adjustment dated March 28, 1996 by and among Addroute
Limited and Mercury Asset Management plc.(7)
2.5 Share Exchange Agreement, dated as of August 30, 1996, by and
among the Company, B/G Co., Booth American Company, Columbia
Management, Inc. and Robert T. Goad(9)
2.6 Share Purchase Agreement, dated October 7, 1996, by and among the
Company, South Wales Electricity plc and Swalec Telco Investment
Limited(9)
3.1 Restated Certificate of Incorporation of the Company, as amended
by the Certificate of Amendment, dated June 5, 1996(8)
3.1(a) Certificate of Ownership and Merger, dated as of March 26, 1997(6)
3.2 Restated By-laws of the Company(1)
4.1 Indenture, dated as of March 13, 1998, by and between the Company
and The Chase Manhattan Bank, as Trustee, with respect to the
Sterling Senior Notes(11)
4.2 Indenture, dated as of March 13, 1998, by and between the Company
and The Chase Manhattan Bank, as Trustee, with respect to the
Sterling Deferred Coupon Notes(11)
4.3 Indenture, dated as of March 13, 1998, by and between the Company
and The Chase Manhattan Bank, as Trustee, with respect to the 10
3/4% USD Deferred Coupon Notes(11)
4.4 Registration Rights Agreement, dated as of March 13, 1998, by and
among the Company and Donaldson, Lufkin & Jenrette International,
Morgan Stanley & Co. International Limited, BT Alex. Brown
International, Chase Securities Inc. and Salomon Brothers
International Limited with respect to the Old Sterling Senior
Notes(11)
4.5 Registration Rights Agreement, dated as of March 13, 1998, by and
among the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Morgan Stanley & Co. Incorporated, BT Alex. Brown
Incorporated, Chase Securities Inc. and Salomon Brothers Inc with
respect to the Old USD Deferred Coupon Notes(11)
4.6 Registration Rights Agreement, dated as of March 13, 1998, by and
among the Company and Donaldson, Lufkin & Jenrette International,
Morgan Stanley & Co. International Limited, BT Alex. Brown
International, Divisions of Bankers Trust International PLC Chase
Securities Inc. and Salomon Brothers International Limited with
respect to the Old Sterling Senior Deferred Coupon Notes(11)
4.7 Indenture, dated as of February 12, 1997, by and between the
Company and The Chase Manhattan Bank, as Trustee, with respect to
the 10 1/2 Notes(10)
4.8 Certificate of Designation, dated February 12, 1997, with respect
to the Redeemable Preferred Stock(10)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.9 Registration Rights Agreement, dated February 12, 1997, by and
among the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Chase Securities Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated with respect to the 10% Notes(10)
4.10 Registration Rights Agreement, dated February 12, 1997, by and
among the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Chase Securities Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated with respect to the Redeemable
Preferred Stock(10)
4.11 Form of New Sterling Senior Notes (included in Exhibit 4.1)
4.12 Form of New Sterling Deferred Coupon Notes (included in Exhibit
4.2)
4.13 Form of New USD Deferred Coupon Notes (included in Exhibit 4.3)
4.14 Indenture, dated as of June 12, 1996, by and between the Company
and Chemical Bank, as Trustee, with respect to the 7% Convertible
Notes(8)
4.15 Registration Rights Agreement, dated June 12, 1996, by and among
the Company and Donaldson, Lufkin & Jenrette Securities
Corporation and Salomon Brothers Inc, with respect to the 7%
Convertible Notes(8)
4.16 Indenture, dated as of January 30, 1996, by and among the Company
and Chemical Bank, as Trustee, with respect to the 11 1/2%
Notes(7)
4.17 Registration Rights Agreement, dated January 30, 1996, by and
among the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Salomon Brothers Inc and Chase Securities, Inc., with
respect to the 11 1/2% Notes(7)
4.18 Indenture, dated as of April 20, 1995, by and among the Company
and Chemical Bank, as Trustee, with respect to the 12 3/4%
Notes(2)
4.19 First Supplemental Indenture, dated as of January 22, 1996, by and
among the Company and Chemical Bank, as Trustee with respect to
the Indenture included as Exhibit 4.19(7)
4.20 Registration Agreement, dated April 13, 1995 by and among the
Company and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman, Sachs & Co., with respect to
the 12 3/4% Notes(2)
4.21 Indenture, dated as of April 20, 1995, by and among the Company
and Chemical Bank, as Trustee, with respect to the 7 1/4%
Convertible Notes(3)
4.22 Registration Agreement, dated April 12, 1995, by and among the
Company and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman Sachs & Co., with respect to
the 7 1/4% Convertible Notes(3)
4.23 Indenture, dated as of October 1, 1993, by and among the Company
and Chemical Bank, as Trustee with respect to the 10 7/8% Senior
Notes(4)
4.24 First Supplemental Indenture, dated January 23, 1996, by and among
the Company and Chemical Bank, as Trustee, with respect to the
Indenture included as Exhibit 4.24(7)
4.25 Rights Agreement, dated as of October 1, 1993, between the Company
and Continental Transfer & Trust Company, as Rights Agent(1)
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to the
legality of the notes being registered hereby**
10.1 Compensation Plan Agreements, as amended and restated effective
June 3, 1997(11)
10.2 Form of Director and Officer Indemnity Agreement (together with a
schedule of executed Indemnity Agreements)(2)
11.1 Statement of computation of per share earnings(11)
12.1 Computation of Ratio of Earnings to Fixed Charges and Combined
Fixed Charges and Preferred Stock Dividends*
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
21.1 Subsidiaries of the Company(11)
23.1 Consent of Ernst & Young, LLP*
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1)**
23.3 Consent of Deloitte & Touche LLP*
23.4 Consent of Deloitte & Touche--Birmingham*
23.5 Consent of Deloitte & Touche--London*
24.1 Powers of Attorney (included in the signature pages to the
Registration Statement)*
25.1 Form T-1 Statement of Eligibility of Trustee with respect to
Indenture included as Exhibit 4.1*
25.2 Form T-1 Statement of Eligibility of Trustee with respect to
Indenture included as Exhibit 4.2*
25.3 Form T-1 Statement of Eligibility of Trustee with respect to
Indenture included as Exhibit 4.3*
99.1 Form of Letter of Transmittal in respect of the Notes*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Letter to Client*
99.4 Form of Letter to Brokers, Dealers, Trust Companies and others
Nominees*
99.5 Prescribed Diffusion Service License, dated July 21, 1987, issued
to British Cable Services Limited (now held by CableTel Surrey and
Hampshire Limited) for the area of West Surrey and East Hampshire,
England(5)
99.6 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Clyde Cablevision (renamed CableTel Glasgow) for the
area of Inverclyde, Scotland(5)
99.7 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Clyde Cablevision (renamed CableTel Glasgow) for the
area of Bearsden and Milngavie, Scotland(5)
99.8 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Newport Cablevision Limited (renamed CableTel Newport)
for the area of Newport, Wales(5)
99.9 Prescribed Diffusion Service License, dated July 10, 1984, issued
to Clyde Cablevision (renamed CableTel Glasgow) for the area of
North Glasgow and Clydebank, Strathclyde, Scotland(5)
99.10 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Clyde Cablevision (renamed CableTel Glasgow) for the
area of Greater Glasgow, Scotland(5)
99.11 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Clyde Cablevision (renamed CableTel Glasgow) for the
area of Paisley and Renfrew, Scotland(5)
99.12 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Cable and Satellite Television Holdings Ltd (renamed
CableTel West Glamorgan Limited) for the area of West Glamorgan,
Wales(5)
99.13 Prescribed Diffusion Service License, dated December 3, 1990,
issued to British Cable Services Limited for the area of Cardiff
and Penarth, Wales (now held by CableTel Cardiff Limited)(5)
99.14 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Kirklees Cable (renamed CableTel Kirklees) for the area
of Huddersfield and Dewsbury, West Yorkshire, England(5)
99.15 Prescribed Diffusion Service License, dated December 3, 1990,
issued to CableVision Communications Company of Hertfordshire Ltd
(renamed CableTel Hertfordshire Limited) for the area of
Broxbourne and East Hertfordshire, England(5)
99.16 Prescribed Diffusion Service License, dated December 3, 1990,
issued to CableVision Communications Company Ltd (renamed CableTel
Central Hertfordshire Limited) for the area of Central
Hertfordshire, England(5)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
99.17 Prescribed Diffusion Service License, dated March 26, 1990, issued
to CableVision Bedfordshire Limited (renamed CableTel Bedfordshire
Ltd.) for the area of Luton and South Bedfordshire(5)
99.18 Prescribed Diffusion Service License, dated December 3, 1990,
issued to CableVision North Bedfordshire Ltd (renamed CableTel
North Bedfordshire Ltd.) for the area of North Bedfordshire,
England(5)
99.19 Local Delivery Service License, dated October 2, 1995, issued to
CableTel Northern Ireland Limited for Northern Ireland(5)
99.20 Local Delivery Service License, dated December 6, 1995, issued to
CableTel South Wales Limited for Glamorgan and Gwent, Wales(5)
99.21 Local Delivery Service License, dated March 13, 1991, issued to
Maxwell Cable TV Limited for Pembroke Dock, Dyfed, Wales (now held
by Metro South Wales Limited)(5)
99.22 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Camarthen, Wales (now held by Metro
South Wales Limited)(5)
99.23 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Milford Haven, Wales (now held by
Metro South Wales Limited)(5)
99.24 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Cwmgors (Amman Valley), West
Glamorgan, Wales(5)
99.25 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Ammanford, West Glamorgan, Wales(5)
99.26 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Brecon, Gwent, Wales(5)
99.27 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Haverfordwest, Preseli, Wales(5)
99.28 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Neyland, Preseli, Wales (now held by
Metro South Wales Limited)(5)
99.29 License, dated January 11, 1991, issued to Cablevision
Communications Company of Hertfordshire Ltd (renamed CableTel
Hertfordshire Limited) for the Hertford, Cheshunt and Ware (Lea
Valley) cable franchise, England(5)
99.30 License, dated December 8, 1990, issued to Cablevision
Communications Company Limited for Central Hertfordshire (renamed
CableTel Central Hertfordshire Limited), England(5)
99.31 License, dated August 23, 1989, issued to Cablevision Bedfordshire
Limited for Bedford and surrounding areas, England(5)
99.32 License, dated January 9, 1991, issued to Cablevision North
Bedfordshire Ltd for North Bedfordshire, England(5)
99.33 License, dated January 29, 1991, issued to Clyde Cablevision
(renamed CableTel Glasgow) for the Inverclyde Cable Franchise,
Scotland(5)
99.34 License, dated January 29, 1991, issued to Clyde Cablevision
(renamed CableTel Glasgow) for the Bearsden and Milngavie Cable
Franchise, Scotland(5)
99.35 License, dated January 29, 1991, issued to Clyde Cablevision
(renamed CableTel Glasgow) for the Paisley and Renfrew Cable
Franchise, Scotland(5)
99.36 License, dated June 7, 1985, issued to Clyde Cablevision Ltd
(renamed CableTel Glasgow) for North West Glasgow and Clydebank,
Scotland(5)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
99.37 License, dated January 29, 1991, issued to Clyde Cablevision
(renamed CableTel Glasgow) for the Greater Glasgow cable
franchise, Scotland(5)
99.38 License, dated October 13, 1993, issued to Insight Communications
Cardiff Limited (renamed CableTel Cardiff Limited) for Cardiff,
Wales(5)
99.39 License, dated January 22, 1991, issued to Newport Cablevision
Limited (renamed CableTel Newport), for Newport Cable franchise
Wales(5)
99.40 License, dated May 18, 1990, issued to Cable and Satellite
Television Holdings Limited (renamed CableTel West Glamorgan) for
West Glamorgan, Wales(5)
99.41 License, dated December 20, 1990, issued to Kirklees Cable
(renamed CableTel Kirklees) for the Huddersfield and Dewsbury
cable franchise, England(5)
99.42 License, dated October 13, 1993, issued to Insight Communications
Guildford Limited (renamed CableTel Surrey and Hampshire Limited)
for the West Surrey/East Hampshire (Guildford) Cable Franchise,
England(5)
99.43 License, dated January 20, 1995, issued to CableTel Bedfordshire
Ltd. for the area of South Bedfordshire, England(5)
99.44 License, dated January 20, 1995, issued to CableTel North
Bedfordshire Ltd. for the area of Bedford, England(5)
99.45 License, dated January 20, 1992, issued to Cable and Satellite
Television Holdings Limited (renamed CableTel West Glamorgan
Limited) for the area of Swansea, Neath and Port Talbot, Wales(5)
99.46 License, dated January 20, 1995, issued to Cabletel Hertfordshire
Ltd. for the area of Hertford, Cheshunt and Ware (Lea Valley),
England(5)
99.47 License, dated January 20, 1995, issued to Cabletel Central
Hertfordshire Ltd. for the area of Central Hertfordshire,
England(5)
99.48 License, dated July 21, 1995, issued to CableTel Kirklees(5)
99.49 License, dated June 8, 1995, issued to CableTel Bedfordshire
Ltd.(5)
99.50 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Neyland, Wales(5)
99.51 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Cwmgors, Wales(5)
99.52 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Ammanford, Wales(5)
99.53 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Carmarthen, Wales(5)
99.54 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Haverfordwest, Wales(5)
99.55 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Pembroke Dock, Wales(5)
99.56 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Milford Haven, Wales(5)
99.57 License, dated October 27, 1995, issued to CableTel South Wales
Limited for the area of Glamorgan and Gwent, Wales(5)
99.58 License, dated January 26, 1996, issued to Cabletel South Wales
Limited, for part of the Glamorgan area(5)
99.59 License, dated November 3, 1997, issued to NTL (UK) Group, Inc.
for the Provision of Radio Fixed Access Operator Services(10)
99.60 Agreement and Plan of Amalgamation; Undertaking of Comcast
Corporation; Undertaking of Warburg, Pincus Investors, L.P.(11)
</TABLE>
II-6
<PAGE>
- --------
* Filed herewith.
** To be filed by amendment.
(1) Incorporated by reference from the Company's Registration Statement on
Form S-1, File No. 33-63570.
(2) Incorporated by reference from the Company's Registration Statement on
Form S-4, File No. 33-92794.
(3) Incorporated by reference from the Company's Registration Statement on
Form S-3, File No. 33-92792.
(4) Incorporated by reference from the Company's Registration Statement on
Form S-1, File No. 33-63572.
(5) Incorporated by reference from the Company's Form 8-K, filed with the
Commission on March 20, 1996.
(6) Incorporated by reference from the Company's Form 8-K, filed with the
Commission on March 26, 1997.
(7) Incorporated by reference to the Company's Registration Statement on Form
S-4, File No. 333-1010.
(8) Incorporated by reference to the Company's Registration Statement on Form
S-3, File No. 333-07879.
(9) Incorporated by reference to the Company's Registration Statement on Form
S-3, File No. 333-16751.
(10) Incorporated by reference to the Company's Annual Report on Form 10-K,
filed on March 28, 1997.
(11) Incorporated by reference to the Company's Annual Report on Form 10-K,
filed with the Commission on March 30, 1998.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the notes being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Trust
Indenture Act.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW
YORK, ON THE 5TH DAY OF JUNE, 1998.
NTL Incorporated
/s/ Richard J. Lubasch
By: __________________________________
RICHARD J. LUBASCH
SENIOR VICE PRESIDENT--GENERAL
COUNSEL AND SECRETARY
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY AUTHORIZES GEORGE S.
BLUEMENTHAL, J. BARCLAY KNAPP, RICHARD J. LUBASCH AND GREGG GORELICK AND EACH
AND ANY OF THEM, AS ATTORNEY-IN-FACT AND AGENTS, WITH FULL POWERS OF
SUBSTITUTION, TO SIGN ON HIS OWN BEHALF, INDIVIDUALLY AND IN THE CAPACITIES
STATED BELOW, AND TO FILE ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE
AMENDMENTS) TO THIS REGISTRATION STATEMENT WITH THE SECURITIES AND EXCHANGE
COMMISSION, GRANTING TO SAID ATTORNEY-IN-FACT AND AGENTS FULL POWER AND
AUTHORITY TO PERFORM ANY OTHER ACT ON BEHALF OF THE UNDERSIGNED REQUIRED TO BE
DONE IN THE PREMISES.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
SIGNATURE TITLE DATE
/s/ George S. Blumenthal Chairman of the June 5, 1998
- ------------------------------------ Board, Treasurer
GEORGE S. BLUMENTHAL and Director
/s/ J. Barclay Knapp President, Chief June 5, 1998
- ------------------------------------ Executive and
J. BARCLAY KNAPP Financial Officer
and Director
/s/ Gregg Gorelick Vice President-- June 5, 1998
- ------------------------------------ Controller
GREGG GORELICK
/s/ Sidney R. Knafel Director June 5, 1998
- ------------------------------------
SIDNEY R. KNAFEL
/s/ Ted H. McCourtney Director June 5, 1998
- ------------------------------------
TED H. MCCOURTNEY
/s/ Del Mintz Director June 5, 1998
- ------------------------------------
DEL MINTZ
/s/ Alan J. Patricof Director June 5, 1998
- ------------------------------------
ALAN J. PATRICOF
/s/ Warren Potash Director June 5, 1998
- ------------------------------------
WARREN POTASH
/s/ Michael S. Wilner Director June 5, 1998
- ------------------------------------
MICHAEL S. WILLNER
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
1.1 Purchase Agreement, dated March 6, 1998, by and among
the Company and Donaldson, Lufkin & Jenrette
International, Donaldson, Lufkin & Jenrette Securities
Corporation, Morgan Stanley & Co. International
Limited, Morgan Stanley & Co. Incorporated, BT Alex.
Brown International, Division of Bankers Trust
International PLC, BT Alex. Brown Incorporated, Chase
Securities Inc., Salomon Brothers International Limited
and Salomon Brothers Inc, with respect to the Old
Notes*
2.1 Amended and Restated Agreement of Reorganization and
Plan of Merger Agreement, dated as of May 28, 1993, by
and between the Company and OCOM(1)
2.2 Deed of Irrevocable undertaking dated March 28, 1996 by
and among Addroute Limited, certain shareholders in the
NTL Group Limited, NTL Group Limited and International
CableTel Incorporated(7)
2.3 Form of Offer Document dated March 28, 1996 of Addroute
Limited for NTL Group Limited(7)
2.4 Deed of Adjustment dated March 28, 1996 by and among
Addroute Limited and Mercury Asset Management plc.(7)
2.5 Share Exchange Agreement, dated as of August 30, 1996,
by and among the Company, B/G Co., Booth American
Company, Columbia Management, Inc. and Robert T.
Goad(9)
2.6 Share Purchase Agreement, dated October 7, 1996, by and
among the Company, South Wales Electricity plc and
Swalec Telco Investment Limited(9)
3.1 Restated Certificate of Incorporation of the Company,
as amended by the Certificate of Amendment, dated June
5, 1996(8)
3.1(a) Certificate of Ownership and Merger, dated as of March
26, 1997(6)
3.2 Restated By-laws of the Company(1)
4.1 Indenture, dated as of March 13, 1998, by and between
the Company and The Chase Manhattan Bank, as Trustee,
with respect to the Sterling Senior Notes(11)
4.2 Indenture, dated as of March 13, 1998, by and between
the Company and The Chase Manhattan Bank, as Trustee,
with respect to the Sterling Deferred Coupon Notes(11)
4.3 Indenture, dated as of March 13, 1998, by and between
the Company and The Chase Manhattan Bank, as Trustee,
with respect to the 10 3/4% USD Deferred Coupon
Notes(11)
4.4 Registration Rights Agreement, dated as of March 13,
1998, by and among the Company and Donaldson, Lufkin &
Jenrette International, Morgan Stanley & Co.
International Limited, BT Alex. Brown International,
Chase Securities Inc. and Salomon Brothers
International Limited with respect to the Old Sterling
Senior Notes(11)
4.5 Registration Rights Agreement, dated as of March 13,
1998, by and among the Company and Donaldson, Lufkin &
Jenrette Securities Corporation, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Chase
Securities Inc. and Salomon Brothers Inc with respect
to the Old USD Deferred Coupon Notes(11)
4.6 Registration Rights Agreement, dated as of March 13,
1998, by and among the Company and Donaldson, Lufkin &
Jenrette International, Morgan Stanley & Co.
International Limited, BT Alex. Brown International,
Division of Bankers Trust International PLC Chase
Securities Inc. and Salomon Brothers International
Limited with respect to the Old Sterling Senior
Deferred Coupon Notes(11)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
4.7 Indenture, dated as of February 12, 1997, by and
between the Company and The Chase Manhattan Bank, as
Trustee, with respect to the 10 1/2 Notes(10)
4.8 Certificate of Designation, dated February 12, 1997,
with respect to the Redeemable Preferred Stock(10)
4.9 Registration Rights Agreement, dated February 12, 1997,
by and among the Company and Donaldson, Lufkin &
Jenrette Securities Corporation, Chase Securities Inc.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated
with respect to the 10% Notes(10)
4.10 Registration Rights Agreement, dated February 12, 1997,
by and among the Company and Donaldson, Lufkin &
Jenrette Securities Corporation, Chase Securities Inc.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated
with respect to the Redeemable Preferred Stock(10)
4.11 Form of New Sterling Senior Notes (included in Exhibit
4.1)
4.12 Form of New Sterling Deferred Coupon Notes (included in
Exhibit 4.2)
4.13 Form of New USD Deferred Coupon Notes (included in
Exhibit 4.3)
4.14 Indenture, dated as of June 12, 1996, by and between
the Company and Chemical Bank, as Trustee, with respect
to the 7% Convertible Notes(8)
4.15 Registration Rights Agreement, dated June 12, 1996, by
and among the Company and Donaldson, Lufkin & Jenrette
Securities Corporation and Salomon Brothers Inc, with
respect to the 7% Convertible Notes(8)
4.16 Indenture, dated as of January 30, 1996, by and among
the Company and Chemical Bank, as Trustee, with respect
to the 11 1/2% Notes(7)
4.17 Registration Rights Agreement, dated January 30, 1996,
by and among the Company and Donaldson, Lufkin &
Jenrette Securities Corporation, Salomon Brothers Inc
and Chase Securities, Inc., with respect to the 11 1/2%
Notes(7)
4.18 Indenture, dated as of April 20, 1995, by and among the
Company and Chemical Bank, as Trustee, with respect to
the 12 3/4% Notes(2)
4.19 First Supplemental Indenture, dated as of January 22,
1996, by and among the Company and Chemical Bank, as
Trustee with respect to the Indenture included as
Exhibit 4.19(7)
4.20 Registration Agreement, dated April 13, 1995 by and
among the Company and Salomon Brothers Inc, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., with respect to the 12 3/4% Notes(2)
4.21 Indenture, dated as of April 20, 1995, by and among the
Company and Chemical Bank, as Trustee, with respect to
the 7 1/4% Convertible Notes(3)
4.22 Registration Agreement, dated April 12, 1995, by and
among the Company and Salomon Brothers Inc, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman
Sachs & Co., with respect to the 7 1/4% Convertible
Notes(3)
4.23 Indenture, dated as of October 1, 1993, by and among
the Company and Chemical Bank, as Trustee with respect
to the 10 7/8% Senior Notes(4)
4.24 First Supplemental Indenture, dated January 23, 1996,
by and among the Company and Chemical Bank, as Trustee,
with respect to the Indenture included as Exhibit
4.24(7)
4.25 Rights Agreement, dated as of October 1, 1993, between
the Company and Continental Transfer & Trust Company,
as Rights Agent(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as
to the legality of the notes being registered hereby**
10.1 Compensation Plan Agreements, as amended and restated
effective June 3, 1997(11)
10.2 Form of Director and Officer Indemnity Agreement
(together with a schedule of executed Indemnity
Agreements)(2)
11.1 Statement of computation of per share earnings(11)
12.1 Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Stock Dividends*
21.1 Subsidiaries of the Company(11)
23.1 Consent of Ernst & Young, LLP*
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)**
23.3 Consent of Deloitte & Touche LLP*
23.4 Consent of Deloitte & Touche--Birmingham*
23.5 Consent of Deloitte & Touche--London*
24.1 Powers of Attorney (included in the signature pages to
the Registration Statement)*
25.1 Form T-1 Statement of Eligibility of Trustee with
respect to Indenture included as Exhibit 4.1*
25.2 Form T-1 Statement of Eligibility of Trustee with
respect to Indenture included as Exhibit 4.2*
25.3 Form T-1 Statement of Eligibility of Trustee with
respect to Indenture included as Exhibit 4.3*
99.1 Form of Letter of Transmittal in respect of the Notes*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Letter to Client*
99.4 Form of Letter to Brokers, Dealers, Trust Companies
and others Nominees*
99.5 Prescribed Diffusion Service License, dated July 21,
1987, issued to British Cable Services Limited (now
held by CableTel Surrey and Hampshire Limited) for the
area of West Surrey and East Hampshire, England(5)
99.6 Prescribed Diffusion Service License, dated December
3, 1990, issued to Clyde Cablevision (renamed CableTel
Glasgow) for the area of Inverclyde, Scotland(5)
99.7 Prescribed Diffusion Service License, dated December
3, 1990, issued to Clyde Cablevision (renamed CableTel
Glasgow) for the area of Bearsden and Milngavie,
Scotland(5)
99.8 Prescribed Diffusion Service License, dated December
3, 1990, issued to Newport Cablevision Limited
(renamed CableTel Newport) for the area of Newport,
Wales(5)
99.9 Prescribed Diffusion Service License, dated July 10,
1984, issued to Clyde Cablevision (renamed CableTel
Glasgow) for the area of North Glasgow and Clydebank,
Strathclyde, Scotland(5)
99.10 Prescribed Diffusion Service License, dated December
3, 1990, issued to Clyde Cablevision (renamed CableTel
Glasgow) for the area of Greater Glasgow, Scotland(5)
99.11 Prescribed Diffusion Service License, dated December
3, 1990, issued to Clyde Cablevision (renamed CableTel
Glasgow) for the area of Paisley and Renfrew,
Scotland(5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
99.12 Prescribed Diffusion Service License, dated December
3, 1990, issued to Cable and Satellite Television
Holdings Ltd (renamed CableTel West Glamorgan Limited)
for the area of West Glamorgan, Wales(5)
99.13 Prescribed Diffusion Service License, dated December
3, 1990, issued to British Cable Services Limited for
the area of Cardiff and Penarth, Wales (now held by
CableTel Cardiff Limited)(5)
99.14 Prescribed Diffusion Service License, dated December
3, 1990, issued to Kirklees Cable (renamed CableTel
Kirklees) for the area of Huddersfield and Dewsbury,
West Yorkshire, England(5)
99.15 Prescribed Diffusion Service License, dated December
3, 1990, issued to CableVision Communications Company
of Hertfordshire Ltd (renamed CableTel Hertfordshire
Limited) for the area of Broxbourne and East
Hertfordshire, England(5)
99.16 Prescribed Diffusion Service License, dated December
3, 1990, issued to CableVision Communications Company
Ltd (renamed CableTel Central Hertfordshire Limited)
for the area of Central Hertfordshire, England(5)
99.17 Prescribed Diffusion Service License, dated March 26,
1990, issued to CableVision Bedfordshire Limited
(renamed CableTel Bedfordshire Ltd.) for the area of
Luton and South Bedfordshire(5)
99.18 Prescribed Diffusion Service License, dated December
3, 1990, issued to CableVision North Bedfordshire Ltd
(renamed CableTel North Bedfordshire Ltd.) for the
area of North Bedfordshire, England(5)
99.19 Local Delivery Service License, dated October 2, 1995,
issued to CableTel Northern Ireland Limited for
Northern Ireland(5)
99.20 Local Delivery Service License, dated December 6,
1995, issued to CableTel South Wales Limited for
Glamorgan and Gwent, Wales(5)
99.21 Local Delivery Service License, dated March 13, 1991,
issued to Maxwell Cable TV Limited for Pembroke Dock,
Dyfed, Wales (now held by Metro South Wales
Limited)(5)
99.22 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Camarthen,
Wales (now held by Metro South Wales Limited)(5)
99.23 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Milford Haven,
Wales (now held by Metro South Wales Limited)(5)
99.24 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Cwmgors (Amman
Valley), West Glamorgan, Wales(5)
99.25 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Ammanford, West
Glamorgan, Wales(5)
99.26 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Brecon, Gwent,
Wales(5)
99.27 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Haverfordwest,
Preseli, Wales(5)
99.28 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Neyland,
Preseli, Wales (now held by Metro South Wales
Limited)(5)
99.29 License, dated January 11, 1991, issued to Cablevision
Communications Company of Hertfordshire Ltd (renamed
CableTel Hertfordshire Limited) for the Hertford,
Cheshunt and Ware (Lea Valley) cable franchise,
England(5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
99.30 License, dated December 8, 1990, issued to Cablevision
Communications Company Limited for Central
Hertfordshire (renamed CableTel Central Hertfordshire
Limited), England(5)
99.31 License, dated August 23, 1989, issued to Cablevision
Bedfordshire Limited for Bedford and surrounding
areas, England(5)
99.32 License, dated January 9, 1991, issued to Cablevision
North Bedfordshire Ltd for North Bedfordshire,
England(5)
99.33 License, dated January 29, 1991, issued to Clyde
Cablevision (renamed CableTel Glasgow) for the
Inverclyde Cable Franchise, Scotland(5)
99.34 License, dated January 29, 1991, issued to Clyde
Cablevision (renamed CableTel Glasgow) for the
Bearsden and Milngavie Cable Franchise, Scotland(5)
99.35 License, dated January 29, 1991, issued to Clyde
Cablevision (renamed CableTel Glasgow) for the Paisley
and Renfrew Cable Franchise, Scotland(5)
99.36 License, dated June 7, 1985, issued to Clyde
Cablevision Ltd (renamed CableTel Glasgow) for North
West Glasgow and Clydebank, Scotland(5)
99.37 License, dated January 29, 1991, issued to Clyde
Cablevision (renamed CableTel Glasgow) for the Greater
Glasgow cable franchise, Scotland(5)
99.38 License, dated October 13, 1993, issued to Insight
Communications Cardiff Limited (renamed CableTel
Cardiff Limited) for Cardiff, Wales(5)
99.39 License, dated January 22, 1991, issued to Newport
Cablevision Limited (renamed CableTel Newport), for
Newport Cable franchise Wales(5)
99.40 License, dated May 18, 1990, issued to Cable and
Satellite Television Holdings Limited (renamed
CableTel West Glamorgan) for West Glamorgan, Wales(5)
99.41 License, dated December 20, 1990, issued to Kirklees
Cable (renamed CableTel Kirklees) for the Huddersfield
and Dewsbury cable franchise, England(5)
99.42 License, dated October 13, 1993, issued to Insight
Communications Guildford Limited (renamed CableTel
Surrey and Hampshire Limited) for the West Surrey/East
Hampshire (Guildford) Cable Franchise, England(5)
99.43 License, dated January 20, 1995, issued to CableTel
Bedfordshire Ltd. for the area of South Bedfordshire,
England(5)
99.44 License, dated January 20, 1995, issued to CableTel
North Bedfordshire Ltd. for the area of Bedford,
England(5)
99.45 License, dated January 20, 1992, issued to Cable and
Satellite Television Holdings Limited (renamed
CableTel West Glamorgan Limited) for the area of
Swansea, Neath and Port Talbot, Wales(5)
99.46 License, dated January 20, 1995, issued to Cabletel
Hertfordshire Ltd. for the area of Hertford, Cheshunt
and Ware (Lea Valley), England(5)
99.47 License, dated January 20, 1995, issued to Cabletel
Central Hertfordshire Ltd. for the area of Central
Hertfordshire, England(5)
99.48 License, dated July 21, 1995, issued to CableTel
Kirklees(5)
99.49 License, dated June 8, 1995, issued to CableTel
Bedfordshire Ltd.(5)
99.50 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Neyland, Wales(5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
99.51 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Cwmgors, Wales(5)
99.52 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Ammanford, Wales(5)
99.53 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Carmarthen, Wales(5)
99.54 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Haverfordwest, Wales(5)
99.55 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Pembroke Dock, Wales(5)
99.56 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Milford Haven, Wales(5)
99.57 License, dated October 27, 1995, issued to CableTel
South Wales Limited for the area of Glamorgan and
Gwent, Wales(5)
99.58 License, dated January 26, 1996, issued to Cabletel
South Wales Limited, for part of the Glamorgan area(5)
99.59 License, dated November 3, 1997, issued to NTL (UK)
Group, Inc. for the Provision of Radio Fixed Access
Operator Services(10)
99.60 Agreement and Plan of Amalgamation; Undertaking of
Comcast Corporation; Undertaking of Warburg, Pincus
Investors, L.P.(11)
</TABLE>
- --------
* Filed herewith.
** To be filed by amendment.
(1) Incorporated by reference from the Company's Registration Statement on
Form S-1, File No. 33-63570.
(2) Incorporated by reference from the Company's Registration Statement on
Form S-4, File No. 33-92794.
(3) Incorporated by reference from the Company's Registration Statement on
Form S-3, File No. 33-92792.
(4) Incorporated by reference from the Company's Registration Statement on
Form S-1, File No. 33-63572.
(5) Incorporated by reference from the Company's Form 8-K, filed with the
Commission on March 20, 1996.
(6) Incorporated by reference from the Company's Form 8-K, filed with the
Commission on March 26, 1997.
(7) Incorporated by reference to the Company's Registration Statement on Form
S-4, File No. 333-1010.
(8) Incorporated by reference to the Company's Registration Statement on Form
S-3, File No. 333-07879.
(9) Incorporated by reference to the Company's Registration Statement on Form
S-3, File No. 333-16751.
(10) Incorporated by reference to the Company's Annual Report on Form 10-K,
filed on March 28, 1997.
(11) Incorporated by reference to the Company's Annual Report on Form 10-K,
filed with the Commission on March 30, 1998.
<PAGE>
EXHIBIT 1.1
NTL INCORPORATED
(Pounds)125,000,000 9.50% SENIOR NOTES DUE 2008
(Pounds)300,000,000 10.75% SENIOR DEFERRED COUPON NOTES DUE 2008
$1,300,000,000 9.75% SENIOR DEFERRED COUPON NOTES DUE 2008
PURCHASE AGREEMENT
March 6, 1998
Donaldson, Lufkin & Jenrette International
Donaldson, Lufkin & Jenrette Securities Corporation
Morgan Stanley & Co. International Limited
Morgan Stanley & Co. Incorporated
BT Alex. Brown International, Division of Bankers Trust International PLC
BT Alex. Brown Incorporated
Chase Securities Inc.
Salomon Brothers International Limited
Salomon Bothers Inc
c/o Donaldson, Lufkin & Jenrette International
99 Bishopsgate
London EC2M 3XD
England
Ladies and Gentlemen:
NTL Incorporated, a Delaware corporation (the "Company"), proposes to
-------
issue and sell (i) to the parties named in Schedule I hereto (Pounds)125,000,000
aggregate principal amount of its 9.50% Senior Notes Due 2008 (the "Sterling
--------
Senior Notes") and (Pounds)300,000,000 aggregate principal amount at maturity of
- ------------
its 10.75% Senior Deferred Coupon Notes Due 2008 (the "Sterling Deferred Coupon
------------------------
Notes") and (ii) to the parties named in Schedule II hereto $1,300,000,000
- -----
aggregate principal amount at maturity of its 9.75% Senior Deferred Coupon Notes
Due 2008 (the "USD Deferred Coupon Notes" and, together with the Sterling Senior
-------------------------
Notes and the Sterling Deferred Coupon Notes, the "Securities"). The parties
----------
named in Schedule I and Schedule II hereto are each, individually, an "Initial
-------
Purchaser" and, collectively, the "Initial Purchasers." The Sterling Senior
- --------- -------------------
Notes are to be issued under an indenture (the "Sterling Senior Notes
---------------------
Indenture"), dated as of March 13, 1998, between the Company and The Chase
Manhattan Bank, as trustee (the "Sterling Senior Notes Trustee"), the Sterling
-----------------------------
Deferred Coupon Notes are to be issued under an indenture (the "Sterling
--------
Deferred Coupon Notes Indenture"), dated as of March 13, 1998, between the
- -------------------------------
Company
<PAGE>
and The Chase Manhattan Bank, as trustee (the "Sterling Deferred Coupon Notes
------------------------------
Trustee"), and the USD Deferred Coupon Notes are to be issued under an indenture
- -------
(the "USD Deferred Coupon Notes Indenture" and, together with the Sterling
-----------------------------------
Senior Notes Indenture and the Sterling Deferred Coupon Notes Indenture, the
"Indentures"), dated as of March 13, 1998, between the Company and The Chase
- -----------
Manhattan Bank, as trustee (the "USD Deferred Coupon Notes Trustee" and,
---------------------------------
together with the Sterling Senior Notes Trustee and the Sterling Deferred Coupon
Notes Trustee, the "Trustees").
--------
The sale of the Securities to the Initial Purchasers will be made
without registration of the Securities under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon exemptions from the
--------------
registration requirements of the Securities Act. You have advised the Company
that you will offer and sell the Securities purchased by you hereunder in
accordance with Section 4 hereof as soon as you deem advisable after the
execution and delivery of this Agreement.
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum, dated February 11, 1998 (the
"Preliminary Offering Memorandum"), and a final offering memorandum, dated March
- --------------------------------
6, 1998 (the "Final Offering Memorandum"). Each of the Preliminary Offering
-------------- ----------
Memorandum and the Final Offering Memorandum sets forth certain information
concerning the Company and the Securities. The Company hereby confirms that it
has authorized the use of the Preliminary Offering Memorandum and the Final
Offering Memorandum, and any amendment or supplement thereto, in connection with
the offer and sale of the Securities by the Initial Purchasers. Unless stated to
the contrary, all references herein to the Final Offering Memorandum are to the
Final Offering Memorandum at the Execution Time (as defined below) and are not
meant to include any amendment or supplement, or any information incorporated by
reference therein, subsequent to the Execution Time.
The holders of the Securities will be entitled to the benefits of the
Registration Rights Agreements to be entered into between the Company and the
Initial Purchasers (the "Registration Rights Agreements").
------------------------------
1. Representations and Warranties. The Company represents and
------------------------------
warrants to each Initial Purchaser as set forth below in this Section 1.
(a) The Preliminary Offering Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any
material fact (other than pricing terms and other financial terms
intentionally left blank) necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
Final Offering Memorandum, at the date hereof, does not, and at the Closing
Date (as defined below) will not (and any amendment or supplement thereto,
at the date thereof and at the Closing Date, will not), contain any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the Company
-------- -------
makes no representation or warranty as to the information contained in or
omitted from the Preliminary Offering Memorandum or the Final Offering
Memorandum, or any amendment
2
<PAGE>
or supplement thereto, in reliance upon and in conformity with information
relating to any Initial Purchaser furnished in writing to the Company by or
on behalf of the Initial Purchasers specifically for inclusion therein.
(b) Neither the Company, nor any of its Affiliates, (as defined in
Rule 501(b) of Regulation D under the Securities Act ("Regulation D")), nor
------------
any person acting on its or their behalf has, directly or indirectly, made
offers or sales of any security, or solicited offers to buy any security,
under circumstances that would require the registration of the Securities
under the Securities Act.
(c) No securities of the same class as the Securities have been
issued and sold by the Company within the six-month period immediately
prior to the date hereof.
(d) Neither the Company, nor any of its Affiliates, nor any person
acting on its or their behalf has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with any offer or sale of the Securities in the United States.
(e) Neither the Company, nor any of its Affiliates, nor any person
acting on its or their behalf has engaged or will engage in any directed
selling efforts within the meaning of Regulation S under the Securities Act
("Regulation S") with respect to the Securities, and each of them has
------------
complied with the offering restriction requirements of Regulation S in
connection with the offering of the Securities outside the United States.
(f) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(g) The Company has been advised by the National Association of
Securities Dealers, Inc. PORTAL Market ("PORTAL") that the Securities have
------
been or will be designated PORTAL eligible securities in accordance with
the rules and regulations of the National Association of Securities
Dealers, Inc.
(h) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended (the "Investment Company
------------------
Act"), without taking account of any exemption arising out of the number of
holders of the Company's securities.
(i) The Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing (or the
local equivalent thereof, if any) under the laws of its jurisdiction of
incorporation and has the corporate power and authority to carry on its
business as it is currently being conducted and to own, lease and operate
its properties, in each case, as described in the Preliminary Offering
Memorandum and the Final Offering Memorandum, and each is duly qualified
and in good standing as a foreign
3
<PAGE>
corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified or in good
standing would not have a material adverse effect on the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
(j) Neither the Company nor any of its subsidiaries is in violation
of its respective certificate of incorporation or by-laws or other
governing documents or is in default in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any indenture, material agreement or
material instrument to which the Company or any of its Material
Subsidiaries (as defined in the Indentures) is a party or by which it or
any of its Material Subsidiaries is bound or to which any of their
respective properties is subject or, except as referred to in the
Preliminary Offering Memorandum and the Final Offering Memorandum, is in
violation of any law, statute, rule, regulation, judgment or court decree
applicable to the Company or any of its Material Subsidiaries or any of
their respective properties (including any laws, statutes, rules or
regulations promulgated by the Independent Television Commission ("ITC"),
---
the Office of Telecommunications ("OFTEL") and the Department of Trade and
-----
Industry ("DTI")), nor has any event occurred which with notice or lapse of
---
time or both would constitute such a violation or default, except in each
case, which would not have a material adverse effect on the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
(k) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Indentures and the Registration Rights Agreements and to issue, sell and
deliver the Securities as provided herein and therein.
(l) The (i) issuance and sale of the Securities by the Company, (ii)
execution, delivery and performance of this Agreement, the Indentures and
the Registration Rights Agreements, (iii) compliance by the Company with
the provisions of the Securities, this Agreement, the Indentures and the
Registration Rights Agreements, and (iv) consummation of the transactions
contemplated by any of the Securities, this Agreement, the Indentures and
the Registration Rights Agreements, will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body, including the Federal Communications
Commission, ITC, OFTEL or DTI (except such as may be required under the
securities or Blue Sky laws of the various states and those consents,
authorizations, approvals, orders, filings, registrations or notices that
have been obtained or made and are in full force and effect) and will not
conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the certificate of incorporation or by-laws (or other
governing documents) of the Company or any of its subsidiaries or any bond,
debenture, note or any other evidence of indebtedness or in any indenture,
material agreement or material instrument to which the Company or any of
its Material Subsidiaries
4
<PAGE>
is a party or by which it or any of its Material Subsidiaries is bound or
any of their respective properties is subject, or violate or conflict with
any law, statute, rule, regulation, judgment or court decree applicable to
the Company or any of its Material Subsidiaries or any of their respective
properties (including any laws, statutes, rules or regulations promulgated
by ITC, OFTEL or DTI).
(m) Except as otherwise set forth in the Preliminary Offering
Memorandum and the Final Offering Memorandum, there are no material
investigations, proceedings or actions, whether judicial or administrative
and whether brought by any regulatory body, administrative agency or other
governmental body or by any other person, pending, or, to the knowledge of
the Company, threatened, to which the Company or any of its Material
Subsidiaries is a party or of which any of their respective properties is
the subject.
(n) The Company and each of its Material Subsidiaries have all such
permits, licenses, franchises and authorizations of governmental or
regulatory authorities or other rights currently necessary to be procured
by them in order to engage in the respective businesses currently conducted
by each of them as set forth in the Preliminary Offering Memorandum and the
Final Offering Memorandum (collectively, "Permits"), including, without
-------
limitation, under any laws regulating or relating to the conduct of
cable/telephony operations, as are necessary to own, lease and operate its
respective properties and to conduct its business, except where the failure
to have any such Permit would not have a material adverse effect on the
business, financial condition or results of operations of the Company and
its subsidiaries taken as a whole; the Company and each of its Material
Subsidiaries have fulfilled and performed all of their respective
obligations with respect to such Permits, and no event has occurred that
allows, or after notice or lapse of time would allow, revocation or
termination of any such Permit or result in any other impairment of the
rights of the holder of any such Permit, except in each case, as would not
have a material adverse effect on the business, financial condition or
results of operations of the Company and its subsidiaries taken as a whole,
and subject in each case to such qualification as may be set forth in the
Preliminary Offering Memorandum and the Final Offering Memorandum; and,
except as described in the Preliminary Offering Memorandum and the Final
Offering Memorandum, no such Permit contains any restriction that would
have a material adverse effect on the business, financial condition or
results of operations of the Company and its subsidiaries taken as a whole.
Neither the Company nor any of its Material Subsidiaries has any reason to
believe that any governmental body or regulatory agency is considering
limiting, suspending or revoking any Permits, except as would not have a
material adverse effect on the business, financial condition or results of
operations of the Company and its subsidiaries taken as a whole.
(o) This Agreement has been duly and validly authorized, executed and
delivered by the Company.
5
<PAGE>
(p) The Sterling Senior Notes Indenture has been duly and validly
authorized by the Company and, when duly executed and delivered by the
Company and duly authorized, executed and delivered by the Sterling Senior
Notes Trustee, will be the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except to the extent that (i) enforcement thereof may be limited by (1)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting creditors' rights
generally and (2) general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law) and (ii) the
waiver contained in Section 4.04 of the Sterling Senior Notes Indenture may
be deemed unenforceable.
(q) The Sterling Deferred Coupon Notes Indenture has been duly and
validly authorized by the Company and when duly executed and delivered by
the Company and duly authorized, executed and delivered by the Sterling
Deferred Coupon Notes Trustee, will be the valid and legally binding
obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent that (i) enforcement thereof may be
limited by (1) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally and (2) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law) and
(ii) the waiver contained in Section 4.04 of the Sterling Deferred Coupon
Notes Indenture may be deemed unenforceable.
(r) The USD Deferred Coupon Notes Indenture has been duly and validly
authorized by the Company and when duly executed and delivered by the
Company and duly authorized, executed and delivered by the USD Deferred
Coupon Notes Trustee, will be the valid and legally binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except to the extent that (i) enforcement thereof may be limited by (1)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting creditors' rights
generally and (2) general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law) and (ii) the
waiver contained in Section 4.04 of the USD Deferred Coupon Notes Indenture
may be deemed unenforceable.
(s) The Sterling Senior Notes have been duly and validly authorized
by the Company and, when (i) the Sterling Senior Notes have been duly
executed and authenticated in accordance with the terms of the Sterling
Senior Notes Indenture, (ii) the Sterling Senior Notes have been delivered
to and paid for by the Initial Purchasers as contemplated by this Agreement
and (iii) the Sterling Senior Notes Indenture has been duly executed and
delivered by the Company (assuming the due authorization, execution and
delivery thereof by the Sterling Senior Notes Trustee), the Sterling Senior
Notes will be valid and legally binding obligations of the Company,
entitled to the benefits of the Sterling Senior Notes Indenture and
enforceable against the Company in accordance with their terms, except to
the extent that (1) enforcement thereof may be limited by (x) bankruptcy,
insolvency,
6
<PAGE>
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (y) general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and (2) the waiver contained in Section
4.04 of the Sterling Senior Notes Indenture may be deemed unenforceable.
(t) The Sterling Deferred Coupon Notes have been duly and validly
authorized by the Company and, when (i) the Sterling Deferred Coupon Notes
have been duly executed and authenticated in accordance with the terms of
the Sterling Deferred Coupon Notes Indenture, (ii) the Sterling Deferred
Coupon Notes have been delivered to and paid for by the Initial Purchasers
as contemplated by this Agreement and (iii) the Sterling Deferred Coupon
Notes Indenture has been duly executed and delivered by the Company
(assuming the due authorization, execution and delivery thereof by the
Sterling Deferred Coupon Notes Trustee), the Sterling Deferred Coupon Notes
will be valid and legally binding obligations of the Company, entitled to
the benefits of the Sterling Deferred Coupon Notes Indenture and
enforceable against the Company in accordance with their terms, except to
the extent that (1) enforcement thereof may be limited by (x) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally
and (y) general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and (2) the waiver
contained in Section 4.04 of the Sterling Deferred Coupon Notes Indenture
may be deemed unenforceable.
(u) The USD Deferred Coupon Notes have been duly and validly
authorized by the Company and, when (i) the USD Deferred Coupon Notes have
been duly executed and authenticated in accordance with the terms of the
USD Deferred Coupon Notes Indenture, (ii) the USD Deferred Coupon Notes
have been delivered to and paid for by the Initial Purchasers as
contemplated by this Agreement and (iii) the USD Deferred Coupon Notes
Indenture has been duly executed and delivered by the Company (assuming the
due authorization, execution and delivery thereof by the USD Deferred
Coupon Notes Trustee), the USD Deferred Coupon Notes will be valid and
legally binding obligations of the Company, entitled to the benefits of the
USD Deferred Coupon Notes Indenture and enforceable against the Company in
accordance with their terms, except to the extent that (1) enforcement
thereof may be limited by (x) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and (y) general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law) and (2) the waiver contained in Section 4.04 of the USD Deferred
Coupon Notes Indenture may be deemed unenforceable.
(v) Each of the Registration Rights Agreements have been duly and
validly authorized by the Company and, when duly executed and delivered by
the Company (assuming the due authorization, execution and delivery thereof
by the Initial Purchasers), will be the valid and legally binding
obligation of the Company, enforceable against the Company in accordance
with its terms except as the enforceability thereof may be limited
7
<PAGE>
by the effect of (x) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (y) general principles of equity (whether
enforcement is considered in a proceeding in equity or at law).
(w) The consolidated financial statements of the Company and its
subsidiaries present fairly in all material respects the financial position
and results of operations of the Company and its subsidiaries at the
respective dates and for the respective periods indicated. Such financial
statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
presented except as described in the Preliminary Offering Memorandum and
the Final Offering Memorandum and except that the unaudited interim
financial statements are subject to normal year end adjustments. The
selected financial data included in the Preliminary Offering Memorandum and
the Final Offering Memorandum present fairly the information shown therein
and have been prepared on a basis consistent with that of the financial
statements included in the Preliminary Offering Memorandum and the Final
Offering Memorandum.
(x) The Company is subject to and in full compliance with the
reporting requirements of Section 13 or Section 15(d) of the Exchange Act.
(y) The Company has not paid or agreed to pay to any person any
compensation for soliciting another to purchase any securities of the
Company (except as contemplated by this Agreement).
(z) The information provided by the Company pursuant to Section 5(g)
hereof will not, at the date thereof, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(ab) It is not necessary in connection with the offer, sale and
delivery of the Securities in the manner contemplated by this Agreement and
the Final Offering Memorandum to register the Securities under the Act or
to qualify the Indentures under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act").
-------------------
(ac) There is no employee pension or benefit plan with respect to
which the Company or any corporation considered an affiliate of the Company
within the meaning of Section 407(d)(7) of ERISA is a party in interest or
disqualified person. The execution and delivery of this Agreement, the
Indentures and the Registration Rights Agreements, and the resale by the
Initial Purchasers of the Securities to certain purchasers as set forth in
Section 4 hereof will not involve any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code. The
representation made by the Company in the preceding sentence is made in
reliance upon and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by the purchasers of the
8
<PAGE>
Securities as set forth in the Final Offering Memorandum under the Section
entitled "Notice to Investors."
2. Purchase and Sale. (a) Subject to the terms and conditions and in
-----------------
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to each Initial Purchaser, and each Initial Purchaser agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
(i)(A) in the case of the Sterling Senior Notes, 96.929% of the aggregate
principal amount thereof, the principal amount of Notes set forth opposite such
Initial Purchaser's name in Schedule I hereto and (B) in the case of the
Sterling Deferred Coupon Notes, 56.861% of the aggregate principal amount at
maturity thereof, the principal amount at maturity of Notes set forth opposite
such Initial Purchaser's name in Schedule I hereto, and (ii) in the case of the
USD Deferred Coupon Notes, 59.872% of the aggregate principal amount at maturity
thereof, the principal amount at maturity of Notes set forth opposite such
Initial Purchaser's name in Schedule II hereto.
3. Delivery and Payment. Delivery of and payment for the Securities
--------------------
shall be made at 1:00 PM, London time, on March 13, 1998, or such later date as
the Initial Purchasers and the Company may agree or as provided in Section 9
hereof (such date and time of delivery and payment for the Securities being
herein called the "Closing Date"). Delivery of the Securities shall be made to
------------
the Initial Purchasers for their respective accounts against payment by the
Initial Purchasers of the purchase price thereof to or upon the order of the
Company by wire transfer in same-day funds to a Sterling or U.S. dollar account,
as the case may be, designated by the Company or such other manner of payment as
may be designated by the Company and agreed to by the Initial Purchasers not
less than two business days prior to the Closing Date. Delivery of the
Securities shall be made at such location as the Initial Purchasers shall
reasonably designate at least one business day in advance of the Closing Date
and payment for the (i) Sterling Senior Notes and Sterling Deferred Coupon Notes
shall be made at the office of Latham & Watkins ("Counsel for the Initial
-----------------------
Purchasers"), One Angel Court, London, England and (ii) USD Deferred Coupon
- ----------
Notes shall be made at the office of the Counsel for the Initial Purchasers, 885
Third Avenue, New York, New York. Global note certificates representing the
Securities shall be registered in such names and in such denominations as the
Initial Purchasers may request not less than two full U.S. business days in
advance of the Closing Date.
The Company agrees to have the Securities available for inspection and
checking by the Initial Purchasers in London, England, in the case of the
Sterling Senior Notes and the Sterling Deferred Coupon Notes, or New York, New
York, in the case of the USD Deferred Coupon Notes, not later than 1:00 PM local
time on the business day prior to the Closing Date.
4. Offering of Securities. Each Initial Purchaser (i) acknowledges
----------------------
that the Securities have not been registered under the Securities Act and may
not be offered or sold except pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act or pursuant
to an effective registration statement under the Securities Act and (ii)
severally, and not jointly, represents and warrants to, and agrees with, the
Company that:
9
<PAGE>
(a) It has not offered or sold, and will not offer or sell, any
Securities except (i) to those it reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the Securities Act) and
that, in connection with each such sale, it has taken or will take
reasonable steps to ensure that the purchaser of such securities is aware
that such sale is being made in reliance on Rule 144A or (ii) to non-U.S.
persons in accordance with Regulation S and in compliance with the
representations, warranties and agreements in this Section 4 who provide to
it and to the Company a letter in the form of Exhibit A hereto (all such
persons referred to in clauses (i) and (ii) are hereinafter collectively
referred to as "Eligible Purchasers").
-------------------
(b) Neither it nor any of its Affiliates or any person acting on its
or their behalf has made or will make offers or sales of the Securities in
the United States by means of any form of general solicitation or general
advertising (within the meaning of Regulation D) in the United States,
except pursuant to a registered public offering as provided in the
Registration Rights Agreements.
(c) Neither it nor any of its Affiliates, nor any person acting on
its or their behalf will, directly or indirectly, make offers or sales of
any security, or solicit offers to buy any security, under circumstances
that would require the registration of the Securities under the Securities
Act.
(d) Neither it nor any of its Affiliates, nor any person acting on
its or their behalf will engage in any directed selling efforts with
respect to the Securities, except pursuant to a registered public offering
as provided in the Registration Rights Agreements.
(e) (i) It has not offered or sold, and, prior to the expiry of the
period of six months from the Closing Date, it will not offer or sell, any
Securities in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or as agent) for the purposes of their businesses
or otherwise in circumstances which have not resulted and will not result
in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995, (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986
with respect to anything done by it in relation to the Securities in, from
or otherwise involving the United Kingdom, and (iii) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Securities to a person
who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996, as amended, or is
a person to whom the document may otherwise lawfully be issued or passed
on.
(f) No action has been or will be taken by the Company or any other
person that would permit the offer or sale of the Securities or the
possession or the distribution of the Preliminary Offering Memorandum or
the Final Offering Memorandum or any other offering
10
<PAGE>
or publicity material relating to the Securities in any jurisdiction where
action for that purpose is required. The Company shall have no
responsibility with respect to the rights of any person to offer or sell
Securities or to distribute the Preliminary Offering Memorandum or the
Final Offering Memorandum or any other offering material relating to the
Securities in any jurisdiction. Accordingly, no Initial Purchaser shall
offer, sell or deliver any Securities, or distribute the Preliminary
Offering Memorandum or the Final Offering Memorandum or any other offering
or publicity material relating to the Securities, in any jurisdiction
except in compliance with applicable laws and regulations of that
jurisdiction. Each Initial Purchaser shall obtain any consent, approval or
authorization required for it to offer or sell Securities, or to distribute
the Preliminary Offering Memorandum or the Final Offering Memorandum or any
other offering or publicity material relating to the Securities under the
laws or regulations of any jurisdiction where it proposes to make offers or
sales of Securities, or to distribute the Preliminary Offering Memorandum
or the Final Offering Memorandum or any other offering material relating to
the Securities, in each case at its own expense, except for the reasonable
fees and disbursements of Counsel for the Initial Purchasers relating to
the registration or qualification of the Securities for offer and sale
under the securities or Blue Sky laws of the several states of the United
States.
(g) The Securities have not been and will not be registered under the
Securities Act and may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons except in accordance
with Regulation S or pursuant to an exemption from the registration
requirements of the Securities Act. It represents that it has not offered,
sold or delivered the Securities, and will not offer, sell or deliver the
Securities (i) as part of its distribution at any time or (ii) otherwise
until 40 days after the later of the commencement of the offering and the
Closing Date, within the United States or to, or for the account or benefit
of, U.S. persons, except in accordance with Rule 903 of Regulation S or
Rule 144A under the Securities Act. Accordingly, it agrees that neither it,
its Affiliates nor any persons acting on its or their behalf has engaged or
will engage in any directed selling efforts within the meaning of Rule
901(b) of Regulation S with respect to the Securities, and it, its
Affiliates and all persons acting on its or their behalf have complied and
will comply with the offering restrictions requirements of Regulation S.
(h) It represents and agrees that the Securities offered and sold in
reliance on Regulation S have been and will be offered and sold only in
offshore transactions and that such securities have been and will be
represented upon issuance by a global security that may not be exchanged
for definitive securities until the expiration of the Restricted Period (as
defined in Rule 902(m) of Regulation S) and only upon certification of
beneficial ownership of the securities by a non-U.S. person or a U.S.
person who purchased such securities in a transaction that was exempt from
the registration requirements of the Securities Act.
(i) It agrees that, at or prior to confirmation of a sale of
Securities (other than a sale in accordance with Section 4(a) hereof), it
will have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases Securities
11
<PAGE>
from it during the Restricted Period a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not
--------------
be offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of their distribution at any
time or (ii) otherwise until 40 days after the later of the
commencement of the offering and the date of closing of the offering,
except in either case in accordance with Regulation S (or Rule 144A or
another exemption from the registration requirements of the Securities
Act if available) under the Securities Act. Terms used above have the
meaning given to them by Regulation S."
It further agrees that it has not entered and will not enter into any
contractual arrangement with respect to the distribution or delivery of the
Securities, except with its Affiliates or with the prior written consent of
the Company.
(j) It agrees not to cause any advertisement of the Securities to be
published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Securities, except such
advertisements that include the statements required by Regulation S.
Terms used in this Section 4 that have meanings assigned to them in
Regulation S are used in this Section 4 as so defined.
5. Agreements. The Company agrees with each Initial Purchaser that:
----------
(a) The Company will furnish to each Initial Purchaser and to Counsel
for the Initial Purchasers, without charge, during the period referred to
in paragraph (b) below, as many copies of the Final Offering Memorandum and
any amendments and supplements thereto as it may reasonably request. The
Company will pay the expenses of printing or other production of all
documents relating to the offering.
(b) At any time prior to the completion of the sale of the Securities
by the Initial Purchasers, the Company will not amend or supplement the
Final Offering Memorandum if the Initial Purchasers reasonably object to
such amendment or supplement within two business days after receiving a
copy thereof, and if at any time prior to the completion of the sale of the
Securities by the Initial Purchasers, any event occurs as a result of which
the Final Offering Memorandum, as then amended or supplemented, would
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it should
be necessary to amend or supplement the Final Offering
12
<PAGE>
Memorandum to comply with applicable law, the Company will promptly notify
the Initial Purchasers of the same, will prepare and provide to the Initial
Purchasers the proposed amendment or supplement which will correct such
statement or omission or effect such compliance and will not publish such
amendment or supplement if the Initial Purchasers reasonably object to the
publication of such amendment or supplement within two business days after
receiving a copy thereof.
(c) The Company will arrange for the qualification of the Securities
for sale by the Initial Purchasers under the laws of such jurisdictions, if
any, as the Initial Purchasers may reasonably designate in writing prior to
the date of this Agreement and will maintain such qualifications in effect
so long as reasonably required for the distribution of the Securities;
provided, however, that the Company shall not be required in connection
-------- -------
therewith to qualify to do business in any jurisdiction where it is not now
so qualified or to take any action which would subject it to general or
unlimited service of process or taxation in any jurisdiction where it is
not now so subject. The Company will promptly advise the Initial Purchasers
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose.
(d) The Company will not, and will not permit any of its Affiliates
to, resell any Securities that have been acquired by any of them.
(e) Neither the Company, nor any of its Affiliates, nor any person
acting on its or their behalf will, directly or indirectly, make offers or
sales of any security, or solicit offers to buy any security, under
circumstances that would require the registration of the Securities under
the Securities Act.
(f) Neither the Company, nor any of its Affiliates, nor any person
acting on its or their behalf will engage in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with any offer or sale of the Securities in the United States,
except pursuant to a registered public offering as provided in the
Registration Rights Agreements.
(g) So long as any of the Securities are "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act, the Company
will, during any period in which it is not subject to and in compliance
with Section 13 or 15(d) of the Exchange Act, provide to each holder of
such restricted securities and to each prospective purchaser (as designated
by such holder) of such restricted securities, upon the request of such
holder or prospective purchaser, any information required to be provided by
Rule 144A(d)(4) under the Securities Act. This covenant is intended to be
for the benefit of the holders, and the prospective purchasers designated
by such holders, from time to time of such restricted securities.
13
<PAGE>
(h) Neither the Company, nor any of its Affiliates, nor any person
acting on its or their behalf will engage in any directed selling efforts
with respect to the Securities, except pursuant to a registered public
offering as provided in the Registration Rights Agreements, and each of
them will comply with the offering restrictions requirement of Regulation
S. Terms used in this paragraph have the meanings given to them by
Regulation S.
(i) The Company will cooperate with the Initial Purchasers and use
its best efforts to permit the Securities to be eligible for clearance and
settlement through DTC and, with respect to any Securities sold in
accordance with Regulation S, the Cedel Bank, societe anonyme ("Cedel
-----
Bank"), and the Euroclear System ("Euroclear").
---------
(j) The Company will not, until 90 days following the Closing Date,
without the prior written consent of the Initial Purchasers, offer, issue,
sell or contract to sell, or otherwise dispose of, directly or indirectly,
or announce the offering of, any senior debt securities issued or
guaranteed by the Company (other than (i) pursuant to a registered public
offering as provided in the Registration Rights Agreements relating to the
Securities, (ii) the solicitation of consents, waivers or any other action
by or from the holders of the Company's debt securities outstanding
immediately prior to the Closing Date or (iii) the negotiation,
syndication, arrangement or completion of, or borrowings under, the Credit
Facility (as defined in the Indentures).
(k) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, to
pay all costs, expenses, fees and taxes incident to and in connection with:
(i) the preparation, printing, filing and distribution of the Preliminary
Offering Memorandum and the Final Offering Memorandum (including, without
limitation, financial statements and supplements thereto), (ii) the
preparation, printing (including, without limitation, word processing and
duplication costs) and delivery of this Agreement, the Registration Rights
Agreements and the Indentures, all Blue Sky Memoranda and all other
agreements, memoranda, correspondence and other documents printed and
delivered in connection herewith and with the sale of the Securities by the
Initial Purchasers to certain purchasers as set forth in Section 4 above,
(iii) the issuance and delivery of the Securities, (iv) the registration or
qualification of the Securities for offer and sale under the securities or
Blue Sky laws of the several states (including, without limitation, the
reasonable fees and disbursements of the Initial Purchasers' counsel
relating to such registration or qualification), (v) the preparation of
certificates for the Securities (including, without limitation, printing
and engraving thereof), (vi) the fees, disbursements and expenses of the
Company's counsel and accountants, (vii) all expenses and listing fees in
connection with the application for quotation of the Securities on PORTAL,
(viii) all fees and expenses (including fees and expenses of counsel) of
the Company in connection with approval of the Securities by DTC for "book-
entry" transfer and eligibility of settlement of transactions in the
Securities sold in accordance with Regulation S through Euroclear and Cedel
Bank, (ix) the fees and disbursements of the Trustees and the
14
<PAGE>
registrars of the Securities (including fees and disbursement of their
counsel) and (x) the performance by the Company of its other obligations
under this Agreement.
6. Conditions to the Obligations of the Initial Purchasers. The
-------------------------------------------------------
obligations of the Initial Purchasers to purchase the Securities shall be
subject to the accuracy of the representations and warranties on the part of the
Company contained herein at the date and time that this Agreement is executed
and delivered by the parties hereto (the "Execution Time") and the Closing Date,
--------------
to the accuracy of the statements of the Company made in any certificates
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(a) The Company shall have furnished to the Initial Purchasers the
opinion of Richard J. Lubasch, Senior Vice President, General Counsel and
Secretary of the Company, dated the Closing Date, to the effect that:
(i) each of the Company and CableTel UK Group, Inc. and any
other subsidiary of the Company which is a "significant subsidiary" as
defined in Rule 1-02(w) of Regulation S-X under the Securities Act and
is incorporated under the laws of the State of Delaware (for purposes
of this Section 6(a) only, individually, a "Subsidiary" and
----------
collectively, the "Subsidiaries") has been duly incorporated and is
------------
validly existing as a corporation and is in good standing under the
laws of the State of Delaware with full corporate power and authority
to own its properties and conduct its business as described in the
Final Offering Memorandum, and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification where failure so to
qualify would have a material adverse effect on the Company and its
subsidiaries taken as a whole;
(ii) all the outstanding shares of capital stock of each
Subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable, and, except as otherwise set forth in
the Final Offering Memorandum, all of the outstanding shares of
capital stock of the Subsidiaries are owned by the Company either
directly or through wholly owned subsidiaries free and clear of any
perfected security interest and, to the knowledge of such counsel,
after due inquiry, any other security interests, claims, liens or
encumbrances;
(iii) the Company's authorized equity capitalization is as
set forth in the Final Offering Memorandum;
(iv) the Sterling Senior Notes Indenture has been duly
authorized, executed and delivered by the Company and, assuming the
due authorization, execution and delivery thereof by the Sterling
Senior Notes Trustee, constitutes a valid and legally binding
obligation of the Company enforceable against the
15
<PAGE>
Company in accordance with its terms, except to the extent that (i)
enforcement thereof may be limited by (1) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditor's rights generally and (2)
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and (ii) the waiver
contained in Section 4.04 of the Sterling Senior Notes Indenture may
be deemed unenforceable;
(v) the Sterling Deferred Coupon Notes Indenture has been
duly authorized, executed and delivered by the Company and, assuming
the due authorization, execution and delivery thereof by the Sterling
Deferred Coupon Notes Trustee, constitutes a valid and legally binding
obligation of the Company enforceable against the Company in
accordance with its terms, except to the extent that (i) enforcement
thereof may be limited by (1) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating
to or affecting creditor's rights generally and (2) general principles
of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and (ii) the waiver contained in
Section 4.04 of the Sterling Deferred Coupon Notes Indenture may be
deemed unenforceable;
(vi) the USD Deferred Coupon Notes Indenture has been duly
authorized, executed and delivered by the Company and, assuming the
due authorization, execution and delivery thereof by the USD Deferred
Coupon Notes Trustee, constitutes a valid and legally binding
obligation of the Company enforceable against the Company in
accordance with its terms, except to the extent that (i) enforcement
thereof may be limited by (1) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating
to or affecting creditor's rights generally and (2) general principles
of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and (ii) the waiver contained in
Section 4.04 of the USD Deferred Coupon Notes Indenture may be deemed
unenforceable;
(vii) each of the Registration Rights Agreements has been
duly authorized, executed and delivered by the Company and, assuming
the due authorization, execution and delivery thereof by the Initial
Purchasers, constitutes a valid and legally binding obligation of the
Company enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting creditors'
rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law)
and (iii) the enforceability of indemnification and contribution
provisions may be limited by Federal and state securities laws or the
public policy underlying such laws;
16
<PAGE>
(viii) the Sterling Senior Notes have been duly and validly
authorized and executed by the Company and, when duly authenticated in
accordance with the terms of the Sterling Senior Notes Indenture and
delivered to and paid for by the Initial Purchasers as contemplated by
this Agreement (assuming the due authorization, execution and delivery
of the Sterling Senior Notes Indenture by the Sterling Senior Notes
Trustee), will constitute valid and legally binding obligations of the
Company, entitled to the benefits of the Sterling Senior Notes
Indenture and enforceable against the Company in accordance with their
terms, except to the extent that (1) enforcement thereof may be
limited by (x) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (y) general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law) and (2) the waiver contained in Section 4.04 of the
Sterling Senior Notes Indenture may be deemed unenforceable;
(ix) the Sterling Deferred Coupon Notes have been duly and
validly authorized and executed by the Company and, when duly
authenticated in accordance with the terms of the Sterling Deferred
Coupon Notes Indenture and delivered to and paid for by the Initial
Purchasers as contemplated by this Agreement (assuming the due
authorization, execution and delivery of the Sterling Deferred Coupon
Notes Indenture by the Sterling Deferred Coupon Notes Trustee), will
constitute valid and legally binding obligations of the Company,
entitled to the benefits of the Sterling Deferred Coupon Notes
Indenture and enforceable against the Company in accordance with their
terms, except to the extent that (1) enforcement thereof may be
limited by (x) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (y) general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law) and (2) the waiver contained in Section 4.04 of the
Sterling Deferred Coupon Notes Indenture may be deemed unenforceable;
(x) the USD Deferred Coupon Notes have been duly and validly
authorized and executed by the Company and, when duly authenticated in
accordance with the terms of the USD Deferred Coupon Notes Indenture
and delivered to and paid for by the Initial Purchasers as
contemplated by this Agreement (assuming the due authorization,
execution and delivery of the USD Deferred Coupon Notes Indenture by
the USD Deferred Coupon Notes Trustee), will constitute valid and
legally binding obligations of the Company, entitled to the benefits
of the USD Deferred Coupon Notes Indenture and enforceable against the
Company in accordance with their terms, except to the extent that (1)
enforcement thereof may be limited by (x) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (y)
general principles of equity (regardless of whether enforcement is
considered in
17
<PAGE>
a proceeding in equity or at law) and (2) the waiver contained in
Section 4.04 of the USD Deferred Coupon Notes Indenture may be deemed
unenforceable;
(xi) the statements set forth under the heading "Description
of Notes," "Description of Certain Indebtedness" and "Registration
Rights" in the Final Offering Memorandum, insofar as they purport to
constitute a summary of documents referred to therein (and assuming
that the documents referred to therein are governed by the law of New
York or Delaware) fairly present such documents in all material
respects;
(xii) this Agreement has been duly authorized, executed and
delivered by the Company;
(xiii) no consent, approval, authorization or order of any
Delaware, New York or United States federal court or governmental
agency or body is required for the consummation of the transactions
contemplated herein, except such as may be required under the blue sky
or securities laws of any jurisdiction in connection with the purchase
and sale of the Securities by the Initial Purchasers (as to which
counsel need express no opinion) and such other approvals (specified
in such opinion) as have been obtained;
(xiv) the issuance and sale of the Securities by the Company,
the execution and delivery of the Indentures, the Registration Rights
Agreements and this Agreement by the Company, compliance by the
Company with the terms thereof and the consummation of the
transactions contemplated thereby will not (a) conflict with the
charter or by-laws of the Company, (b) result in any violation of the
General Corporation Law of the State of Delaware, the laws of the
State of New York or the federal laws of the United States of America
(the "Requirements of Law") or (c) constitute a breach of or an event
-------------------
of default under the terms of any indenture or other agreement to
which the Company or any of its subsidiaries is a party or bound which
is listed on Schedule III hereto (except that such counsel need not
express an opinion as to any covenant, restriction or provision of any
such agreement with respect to financial covenants, ratios or tests or
any aspect of the financial condition or results of operations of the
Company or any of its subsidiaries and such counsel may assume that
all such agreements or instruments are governed by the law of New York
or Delaware) or any judgment, order or decree known to such counsel to
be applicable to the Company or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body or
arbitrator (collectively, the "Orders") of the United States or the
------
States of New York or Delaware having jurisdiction over the Company or
any of its subsidiaries which conflict, breach or default will have a
material adverse effect on the condition (financial or otherwise),
earnings, business or properties of the Company and its subsidiaries
taken as a whole or the transactions contemplated by this Agreement;
provided, however, that such counsel's opinion expressed in this
-------- -------
paragraph may be based on such counsel's review of those
18
<PAGE>
Requirements of Law which, in such counsel's experience, are normally
applicable to transactions of the type contemplated by in this
Agreement, but without having made any special investigation
concerning any other Requirements of Law, and those Orders
specifically identified to such counsel by the Company as being Orders
to which it is subject; provided, however, that such counsel need
-------- -------
express no opinion with respect to the United States federal or state
securities laws or blue sky laws, antifraud laws and the rules and
regulations of the National Association of Securities Dealers, Inc.;
(xv) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is or could be a party or to which
any of their respective property is or could be subject, which might
result in a material adverse effect on the business, financial
condition or results of operations of the Company and its
subsidiaries, taken as a whole;
(xvi) each Indenture is in such form that would not preclude
qualification under the Trust Indenture Act, in accordance with the
applicable Registration Rights Agreement;
(xvii) assuming (1) the accuracy of the representations and
warranties of the Company set forth in Section 1 of this Agreement and
of the Initial Purchasers' representations and warranties set forth in
Section 4 of this Agreement, (2) the due performance by the Company of
the agreements set forth in Section 5 of this Agreement and the due
performance by the Initial Purchasers of the agreements set forth in
Section 4 of this Agreement, (3) compliance by the Initial Purchasers
with the offering and transfer procedures and restrictions described
elsewhere in this Agreement and in the Final Offering Memorandum, (4)
the accuracy of the representations and agreements made in accordance
with this Agreement and the Final Offering Memorandum by the
purchasers to whom the Initial Purchasers initially resell the
Securities and (5) that purchasers to whom the Initial Purchasers
initially resell the Securities receive a copy of the Final Offering
Memorandum prior to such sale, the offer, sale and initial resale of
the Securities in the manner contemplated by this Agreement and the
Final Offering Memorandum, do not require registration under the
Securities Act and the Indentures do not require qualification under
the Trust Indenture Act, it being understood that such counsel does
not express any opinion as to any subsequent resale of any Security;
and
(xviii) the Company is not required to be registered as an
"investment company" within the meaning of the Investment Company Act,
without taking account of any exemption arising out of the number of
holders of the Company's securities.
19
<PAGE>
Such counsel shall also state that, in the course of preparation by
the Company of the Final Offering Memorandum, such counsel has participated in
conferences with directors, officers and other representatives of the Company,
representatives of the independent public accountants for the Company,
representatives of the Initial Purchasers and representatives of Counsel for the
Initial Purchasers, at which conferences the contents of the Final Offering
Memorandum and related matters were discussed and, although such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Final Offering
Memorandum and has made no independent check or verification thereof (except as
stated in paragraph (xi) hereof), on the basis of the foregoing (relying as to
materiality to a large extent upon the statements of directors, officers and
other representatives of the Company), no facts have come to such counsel's
attention which have caused such counsel to believe that the Final Offering
Memorandum, as of its date or as of the Closing Date, contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need not express any opinion or belief with respect to the
financial statements and schedules and other financial, statistical and
accounting data included in or excluded from the Final Offering Memorandum).
Such opinion may be limited to the General Corporation Law of the
State of Delaware and the laws of the State of New York and the federal laws of
the United States and may be subject to customary assumptions, qualifications
and exceptions. In rendering such opinion, such counsel may rely as to matters
involving the application of laws of any jurisdiction other than the State of
New York, the State of Delaware or the United States, to the extent such counsel
deems proper and specified in such opinion, upon the opinion of other counsel
who are satisfactory to Counsel for the Initial Purchasers.
All references in this Section 6(a) to the Final Offering Memorandum
shall be deemed to include any amendment or supplement thereto at the Closing
Date.
(b) The Company shall have furnished to the Initial Purchasers the
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
Company, dated the Closing Date, to the effect that:
(i) each of the Company and CableTel UK Group, Inc. (for
purposes of this Section 6(b) only, individually, a "Subsidiary" and
----------
collectively, the "Subsidiaries") has been duly incorporated and is
------------
validly existing as a corporation and is in good standing under the
laws of the State of Delaware;
(ii) the Sterling Senior Notes Indenture has been duly
authorized, executed and delivered by the Company and, assuming the
due authorization, execution and delivery thereof by the Sterling
Senior Notes Trustee, constitutes a valid and legally binding
obligation of the Company enforceable against the Company in
accordance with its terms, except to the extent that (i) enforcement
20
<PAGE>
thereof may be limited by (1) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating
to or affecting creditor's rights generally and (2) general principles
of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and (ii) the waiver contained in
Section 4.04 of the Sterling Senior Notes Indenture may be deemed
unenforceable;
(iii) the Sterling Deferred Coupon Notes Indenture has been
duly authorized, executed and delivered by the Company and, assuming
the due authorization, execution and delivery thereof by the Sterling
Deferred Coupon Notes Trustee, constitutes a valid and legally binding
obligation of the Company enforceable against the Company in
accordance with its terms, except to the extent that (i) enforcement
thereof may be limited by (1) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating
to or affecting creditor's rights generally and (2) general principles
of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and (ii) the waiver contained in
Section 4.04 of the Sterling Deferred Coupon Notes Indenture may be
deemed unenforceable;
(iv) the USD Deferred Coupon Notes Indenture has been duly
authorized, executed and delivered by the Company and, assuming the
due authorization, execution and delivery thereof by the USD Deferred
Coupon Notes Trustee, constitutes a valid and legally binding
obligation of the Company enforceable against the Company in
accordance with its terms, except to the extent that (i) enforcement
thereof may be limited by (1) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating
to or affecting creditor's rights generally and (2) general principles
of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and (ii) the waiver contained in
Section 4.04 of the USD Deferred Coupon Notes Indenture may be deemed
unenforceable;
(v) each of the Registration Rights Agreements has been duly
authorized, executed and delivered by the Company and, assuming the
due authorization, execution and delivery thereof by the Initial
Purchasers, constitutes a valid and legally binding obligation of the
Company enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting creditors'
rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law)
and (iii) the enforceability of indemnification and contribution
provisions may be limited by Federal and state securities laws or the
public policy underlying such laws;
21
<PAGE>
(vi) the Sterling Senior Notes have been duly and validly
authorized and executed by the Company and, when duly authenticated in
accordance with the terms of the Sterling Senior Notes Indenture and
delivered to and paid for by the Initial Purchasers as contemplated by
this Agreement (assuming the due authorization, execution and delivery
of the Sterling Senior Notes Indenture by the Sterling Senior Notes
Trustee), will constitute valid and legally binding obligations of the
Company, entitled to the benefits of the Sterling Senior Notes
Indenture and enforceable against the Company in accordance with their
terms, except to the extent that (1) enforcement thereof may be
limited by (x) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (y) general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law) and (2) the waiver contained in Section 4.04 of the
Sterling Senior Notes Indenture may be deemed unenforceable;
(vii) the Sterling Deferred Coupon Notes have been duly and
validly authorized and executed by the Company and, when duly
authenticated in accordance with the terms of the Sterling Deferred
Coupon Notes Indenture and delivered to and paid for by the Initial
Purchasers as contemplated by this Agreement (assuming the due
authorization, execution and delivery of the Sterling Deferred Coupon
Notes Indenture by the Sterling Deferred Coupon Notes Trustee), will
constitute valid and legally binding obligations of the Company,
entitled to the benefits of the Sterling Deferred Coupon Notes
Indenture and enforceable against the Company in accordance with their
terms, except to the extent that (1) enforcement thereof may be
limited by (x) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (y) general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law) and (2) the waiver contained in Section 4.04 of the
Sterling Deferred Coupon Notes Indenture may be deemed unenforceable;
(viii) the USD Deferred Coupon Notes have been duly and
validly authorized and executed by the Company and, when duly
authenticated in accordance with the terms of the USD Deferred Coupon
Notes Indenture and delivered to and paid for by the Initial
Purchasers as contemplated by this Agreement (assuming the due
authorization, execution and delivery of the USD Deferred Coupon Notes
Indenture by the USD Deferred Coupon Notes Trustee), will constitute
valid and legally binding obligations of the Company, entitled to the
benefits of the USD Deferred Coupon Notes Indenture and enforceable
against the Company in accordance with their terms, except to the
extent that (1) enforcement thereof may be limited by (x) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally and (y) general principles of equity (regardless of whether
enforcement is considered in
22
<PAGE>
a proceeding in equity or at law) and (2) the waiver contained in
Section 4.04 of the USD Deferred Coupon Notes Indenture may be deemed
unenforceable;
(ix) the statements made under the heading "Description of
Notes," "Description of Certain Indebtedness" and "Registration
Rights" in the Final Offering Memorandum, insofar as they constitute
summaries of the provisions of the Indentures and the Securities,
fairly present such provisions in all material respects;
(x) this Agreement has been duly authorized, executed and
delivered by the Company;
(xi) although the discussion in the Final Offering Memorandum
under the caption "Certain Federal Income Tax Considerations" does not
purport to discuss all possible United States federal income tax
consequences of the purchase, ownership and disposition of the
Securities, such discussion constitutes, in all material respects, a
fair summary of the United States federal income tax consequences of
the purchase, ownership and disposition of the Securities under
current law;
(xii) the issuance and sale of the Securities by the Company,
the execution and delivery of the Indentures, the Registration Rights
Agreements and this Agreement by the Company, compliance by the
Company with the terms thereof and the consummation of the
transactions contemplated thereby will not (a) conflict with the
charter or by-laws of the Company, (b) result in any violation of the
General Corporation Law of the State of Delaware, the laws of the
State of New York or the federal laws of the United States of America
(the "Requirements of Law") or (c) constitute a breach of or event of
-------------------
default under the terms of any indenture or other agreement to which
the Company or any of its Subsidiaries is a party or bound which is
listed on Schedule III hereto (except that such counsel need not
express an opinion as to any covenant, restriction or provision of any
such agreement with respect to financial covenants, ratios or tests or
any aspect of the financial condition or results of operations of the
Company or any of its subsidiaries and such counsel may assume that
all such agreements or instruments are governed by the law of New York
or Delaware) or any judgment, order or decree known to such counsel to
be applicable to the Company or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body or
arbitrator (collectively, the "Orders") of the United States or the
------
States of Delaware or New York having jurisdiction over the Company or
any of its subsidiaries; provided, however, that such counsel's
-------- -------
opinion expressed in this paragraph may be based on such counsel's
review of those Requirements of Law which, in such counsel's
experience, are normally applicable to transactions of the type
contemplated by in this Agreement, but without having made any special
investigation concerning any other Requirements of Law, and those
Orders specifically identified to such counsel by the Company as being
Orders to which it is subject; provided, however, that such counsel
-------- -------
need express no opinion in
23
<PAGE>
this paragraph with respect to the United States federal or state
securities laws or blue sky laws, antifraud laws and the rules and
regulations of the National Association of Securities Dealers, Inc.;
(xiii) each Indenture is in such form that would not preclude
qualification under the Trust Indenture Act, in accordance with the
applicable Registration Rights Agreement; and
(xiv) assuming (1) the accuracy of the representations and
warranties of the Company set forth in Section 1 of this Agreement and
of the Initial Purchasers' representations and warranties set forth in
Section 4 of this Agreement, (2) the due performance by the Company of
the agreements set forth in Section 5 of this Agreement and the due
performance by the Initial Purchasers of the agreements set forth in
Section 4 of this Agreement, (3) compliance by the Initial Purchasers
with the offering and transfer procedures and restrictions described
elsewhere in this Agreement and in the Final Offering Memorandum, (4)
the accuracy of the representations and agreements made in accordance
with this Agreement and the Final Offering Memorandum by the
purchasers to whom the Initial Purchasers initially resell the
Securities and (5) that purchasers to whom the Initial Purchasers
initially resell the Securities receive a copy of the Final Offering
Memorandum prior to such sale, the offer, sale and initial resale of
the Securities in the manner contemplated by this Agreement and the
Final Offering Memorandum, do not require registration under the
Securities Act and the Indentures do not require qualification under
the Trust Indenture, it being understood that such counsel does not
express any opinion as to any subsequent resale of any Security.
Such counsel shall also state that, in the course of preparation by
the Company of the Final Offering Memorandum, such counsel has participated in
conferences with directors, officers and other representatives of the Company,
representatives of the independent public accountants for the Company,
representatives of the Initial Purchasers and representatives of Counsel for the
Initial Purchasers, at which conferences the contents of the Final Offering
Memorandum and related matters were discussed and, although such counsel is not
passing upon, and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Final Offering
Memorandum and has made no independent check or verification thereof (except to
the extent stated in paragraphs (ix) and (xi) hereof), on the basis of the
foregoing, no facts have come to such counsel's attention which have caused such
counsel to believe that the Final Offering Memorandum, as of its date and as of
the Closing Date, contained or contains an untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need not express any
opinion or belief with respect to the financial statements and schedules and
other financial, statistical and accounting data included in the Final Offering
Memorandum).
24
<PAGE>
Such opinion may be limited to the General Corporation Law of the
State of Delaware and the laws of the State of New York and the federal laws of
the United States and may be subject to customary assumptions, qualifications
and exceptions. In rendering such opinion, such counsel may rely as to matters
involving the application of laws of any jurisdiction other than the State of
New York, the State of Delaware or the United States, to the extent they deem
proper and specified in such opinion, upon the opinion of other counsel who are
satisfactory to Counsel for the Initial Purchasers.
All references in this Section 6(b) to the Final Offering Memorandum
shall be deemed to include any amendment or supplement thereto at the Closing
Date.
(c) The Company shall have furnished to the Initial Purchasers the
opinion of Robert Mackenzie, Director of Legal Affairs of the Company,
dated the Closing Date, in the form previously approved by counsel to the
Initial Purchasers.
(d) The Initial Purchasers shall have received from Latham & Watkins,
Counsel for the Initial Purchasers, such opinion or opinions, dated the
Closing Date, with respect to the issuance and sale of the Securities, the
Final Offering Memorandum (as amended or supplemented at the Closing Date)
and other related matters as the Initial Purchasers may reasonably require,
and the Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.
(e) The Company shall have furnished to the Initial Purchasers a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the Company,
dated the Closing Date, to the effect that the signers of such certificate
have carefully examined the Final Offering Memorandum, any amendment or
supplement to the Final Offering Memorandum and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date,
and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied hereunder at
or prior to the Closing Date;
(ii) since the date of the most recent financial statements
included in the Final Offering Memorandum, there has been no adverse
change in the condition (financial or other), earnings, business or
properties of the Company and its subsidiaries, which is material to
the Company and its subsidiaries taken as a whole whether or not
arising from transactions in the ordinary course of business, except
as set forth in or contemplated by the Final Offering Memorandum
(exclusive of any amendment or supplement thereto); and
25
<PAGE>
(iii) no consolidated financial statements of the Company
prepared in accordance with U.S. generally accepted accounting
principles as of any date or any period subsequent to September 30,
1997 are available.
(f) At the Execution Time and at the Closing Date, Ernst & Young LLP
shall have furnished to the Initial Purchasers a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form
and substance satisfactory to the Initial Purchasers, confirming that they
are independent auditors with respect to the Company within the meaning of
Rule 101 of AICPA's Code of Professional Conduct and its interpretation and
rulings and stating in effect that:
(i) they have audited the consolidated balance sheets of the
Company and its subsidiaries as of December 31, 1995 and 1996, and the
consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31,
1996, all included in the Final Offering Memorandum;
(ii) they have read the 1997 and 1998 minutes of meetings of
the shareholders and the Board of Directors and other committees of
the Company and its subsidiaries as set forth in the minute books
through a specified date not more than five business days prior to the
date of the letter, and have inquired of certain officials of the
Company who have responsibility for financial and accounting matters;
(iii) with respect to the nine-month periods ended September
30, 1996 and 1997, (X) they have (1) performed the procedures
specified by the American Institute of Certified Public Accountants
for review of interim financial information as described in SAS No.
71, "Interim Financial Information", on the unaudited condensed
consolidated financial statements of the Company and its subsidiaries
(the "Unaudited Financials") included in the Final Offering Memorandum
--------------------
and (2) inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether the
Unaudited Financials are stated on a basis substantially consistent
with that of the audited consolidated financial statements of the
Company and its subsidiaries included in the Final Offering Memorandum
and (Y) as a result of the procedures performed in (X) above, nothing
came to their attention that caused them to believe that any material
modifications should be made to such Unaudited Financials for them to
be in conformity with generally accepted accounting principles;
(iv) with respect to the period subsequent to September 30,
1997, management of the Company has informed them that there were not
any changes at a specified date not more than five business days prior
to the date of the letter, in the long-term debt of the Company and
its subsidiaries or decreases in the capital stock of the Company as
compared with the amounts shown on the September 30, 1997,
26
<PAGE>
condensed consolidated balance sheet referred to above, except in all
instances for changes, decreases or increases set forth in such
letter, in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof unless said
explanation is not deemed necessary by the Initial Purchasers; and
(v) they have performed certain other specified procedures as
a result of which they determined that certain information of
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its subsidiaries) set
forth in the Final Offering Memorandum, including certain information
set forth under the captions "Offering Memorandum Summary"; "Summary
Historical Consolidated Financial Information"; "Risk Factors";
"Capitalization"; "Selected Consolidated Financial Information of the
Company"; "Management's Discussion and Analysis of Results of
Operations and Financial Condition"; "The Company"; "Security
Ownership of Certain Beneficial Owners"; and "Description of Certain
Indebtedness" in the Final Offering Memorandum, agrees with the
accounting records of the Company and its subsidiaries, excluding any
questions of legal interpretation.
(g) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Offering Memorandum, there shall
not have been (i) any change or decrease specified in the letter or letters
referred to in paragraph (f) of this Section 6 or (ii) any change, or any
development involving a prospective change, in or affecting the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries the effect of which is, in the judgment of the
Initial Purchasers, so material and adverse as to make it impractical or
inadvisable to market the Securities as contemplated by the Final Offering
Memorandum.
(h) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Securities Act).
(i) Prior to the Closing Date, the Company shall have furnished to
the Initial Purchasers such further information, certificates and documents
as the Initial Purchasers may reasonably request.
(j) On or prior to the Closing Date, each of the Indentures and the
Registration Rights Agreements shall have been executed substantially in
the form hereto delivered to you and shall have been delivered to you and
the applicable Trustee.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Initial Purchasers and Counsel for the Initial Purchasers,
27
<PAGE>
this Agreement and all obligations of the Initial Purchasers hereunder may be
canceled at, or at any time prior to, the Closing Date by the Initial
Purchasers. Notice of such cancellation shall be given to the Company in writing
or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 will be
delivered at the office of Latham & Watkins, counsel for the Initial Purchasers,
at 885 Third Avenue, New York, New York, on the Closing Date.
7. Reimbursement of Expenses. If the sale of the Securities provided
-------------------------
for herein is not consummated because any condition to the obligations of the
Initial Purchasers set forth in Section 6 hereof is not satisfied, because of
any termination pursuant to Section 10 hereof or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof other than by reason of a default by any of
the Initial Purchasers in payment for the Securities on the Closing Date, the
Company will reimburse the Initial Purchasers severally upon demand for all
reasonable out-of-pocket expenses (including reasonable fees and disbursements
of counsel) that shall have been incurred by them in connection with the
proposed purchase and sale of the Securities against appropriate receipts there
for.
8. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless each Initial Purchaser, each person who controls any
Initial Purchaser within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act and the respective officers, directors,
partners, employees, representatives and agents of such Initial Purchaser or
controlling person thereof against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or other Federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum, the Final Offering Memorandum,
or in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
-------- -------
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the Preliminary Offering Memorandum, the Final Offering Memorandum or any
information provided by the Company to any holder or prospective purchaser of
Securities pursuant to paragraph 5(g) hereof, or in any amendment thereof or
supplement thereto, in reliance upon and in conformity with written information
relating to any Initial Purchaser furnished to the Company by or on behalf of
any Initial Purchaser specifically for inclusion therein; provided, further,
that the foregoing indemnity agreement with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of any Initial Purchaser who failed to
deliver a Final Offering Memorandum (as so amended or supplemented, provided by
the
28
<PAGE>
Company to the several Initial Purchasers in the requisite quantity and on a
timely basis to permit proper delivery on or prior to the written confirmation
of the sale of Securities by such Initial Purchaser to the relevant person) to
the person asserting any losses, claims, damages and liabilities and judgements
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Offering Memorandum, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, if such material
misstatement or omission or alleged material misstatement or omission was cured
in the Final Offering Memorandum. This indemnity agreement will be in addition
to any liability which the Company may otherwise have.
(b) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company, its directors, its officers, and each
person who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to each Initial Purchaser, but only with
reference to written information relating to such Initial Purchaser furnished to
the Company by or on behalf of such Initial Purchaser specifically for inclusion
in the Preliminary Offering Memorandum or the Final Offering Memorandum (or in
any amendment or supplement thereto). This indemnity agreement will be in
addition to any liability which any Initial Purchaser may otherwise have. The
Company acknowledges that the statements relating to the Initial Purchasers set
forth in the last paragraph of the cover page and in the first sentence, the
second sentence and the fourth sentence of the third paragraph, the fifth
paragraph, the second sentence of the eighth paragraph and the ninth paragraph
under the heading "Plan of Distribution" in the Preliminary Offering Memorandum
and the last paragraph of the cover page and in the first sentence, the second
sentence and the fourth sentence of the fourth paragraph, the eighth paragraph,
the second sentence of the eleventh paragraph and the twelfth paragraph under
the heading "Plan of Distribution" in the Final Offering Memorandum constitute
the only information furnished in writing by or on behalf of the Initial
Purchasers for inclusion in the Preliminary Offering Memorandum or the Final
Offering Memorandum (or in any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action (including any governmental
investigation), such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the commencement thereof; but the failure so to
notify the indemnifying party (i) will not relieve it from liability under
paragraph (a) or (b) above unless and to the extent it did not otherwise learn
of such action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
-------- -------
reasonably satisfactory to the indemnified party. Notwithstanding the
29
<PAGE>
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel if (i) the
indemnifying party shall authorize the indemnified party in writing to employ
separate counsel at the expense of the indemnifying party, (ii) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (iii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of the institution of such action or (iv) the named parties of any such action
(including any impleaded parties) include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
based upon the advice of such counsel (with a copy to the indemnifying party)
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party (in any of which cases the indemnifying party shall not have
the right to assume the defense of such action on behalf of such indemnified
party, it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) for all such
indemnified parties, which firm shall be designated in writing by the
indemnified party, and that all such reasonable fees and expenses shall be
reimbursed as they are incurred upon written request and presentation of
satisfactory invoices). The indemnifying party shall indemnify and hold
harmless the indemnified party from and against all losses, claims, damages and
liabilities by reason of any settlement of any action (i) effected with its
written consent or (ii) effected without its written consent if the settlement
is entered into more than twenty business days after the indemnifying party
shall have received a request from the indemnified party for reimbursement for
the fees and expenses of counsel (in any case where such fees and expenses are
at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. Notwithstanding the immediately preceding sentence, if
at any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, an
indemnifying party shall not be liable for any settlement of the nature
contemplated by the immediately preceding sentence effected without its consent
if such indemnifying party (i) reimburses such indemnified party in accordance
with such request to the extent that it considers such request to be reasonable
and (ii) provides written notice to the indemnified party substantiating the
unpaid balance as unreasonable, in each case, prior to the date of settlement.
An indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act, by or on behalf of the indemnified party.
30
<PAGE>
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Initial Purchasers agree
to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the Company
------
and one or more of the Initial Purchasers may be subject in such proportion as
is appropriate to reflect the relative benefits received by the Company and by
the Initial Purchasers from the offering of the Securities; provided, however,
-------- -------
that in no case shall any Initial Purchaser (except as may be provided in any
agreement among the Initial Purchasers relating to the offering of the
Securities) be responsible for any amount in excess of the purchase discount or
commission applicable to the Securities purchased by such Initial Purchaser
hereunder. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the Initial Purchasers shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and of the Initial
Purchasers in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Benefits received
by the Company shall be deemed to be equal to the total net proceeds from the
offering (before deducting expenses), and benefits received by the Initial
Purchasers shall be deemed to be equal to the total purchase discounts and
commissions received by the Initial Purchasers from the Company in connection
with the purchase of the Securities hereunder. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company or the Initial Purchasers. The
Initial Purchasers' respective obligations to contribute to this Section 8 are
several in proportion to the respective principal amount of Securities they have
purchased hereunder, and not joint. The Company and the Initial Purchasers agree
that it would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls an
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act and each director, officer, employee and agent of an Initial
Purchaser shall have the same rights to contribution as such Initial Purchaser,
and each person who controls the Company within the meaning of either the
Securities Act or the Exchange Act and each officer, director, employee and
agent of the Company shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions of this paragraph
(d).
9. Default by an Initial Purchaser. If any one or more Initial
-------------------------------
Purchasers shall fail to purchase and pay for any of the Securities agreed to be
purchased by such Initial Purchaser hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Initial Purchasers shall be obligated severally to take
up and pay for (in the respective proportions which the principal amount of the
Senior Notes, the Sterling Deferred Coupon Notes or the USD Deferred Coupon
Notes, as applicable, set forth opposite their names in Schedule I or Schedule
II, as the case may be, bears to the aggregate principal amount of such
Securities set forth opposite the names of all the remaining Initial
31
<PAGE>
Purchasers in Schedule I or Schedule II, as the case may be) the Securities
which the defaulting Initial Purchaser or Initial Purchasers agreed but failed
to purchase; provided, however, that in the event that the aggregate principal
-------- -------
amount of such Securities which the defaulting Initial Purchaser or Initial
Purchasers agreed but failed to purchase shall exceed 10% of the aggregate
principal amount of such Securities set forth in Schedule I or Schedule II, as
the case may be, the remaining Initial Purchasers that agreed to purchase such
Securities shall have the right to purchase all, but shall not be under any
obligation to purchase any, of such Securities, and if such non-defaulting
Initial Purchasers do not purchase all such Securities, this Agreement will
terminate without liability to any non-defaulting Initial Purchaser or the
Company. In the event of a default by any Initial Purchaser as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the non-defaulting Initial Purchasers shall determine in order
that the required changes in the Final Offering Memorandum or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Initial Purchaser of its liability, if any, to the
Company or any non-defaulting Initial Purchaser for damages occasioned by its
default hereunder.
10. Termination. This Agreement shall be subject to termination in
-----------
the absolute discretion of the Initial Purchasers, by notice given to the
Company prior to delivery of and payment for the Securities, if prior to such
time (i) trading in any of the Company's securities shall have been suspended by
the Commission or by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") or trading in securities generally on the New York
------
Stock Exchange, the Luxembourg Stock Exchange or NASDAQ shall have been
materially suspended or materially limited (except such limitations on such
trading in effect as of the Execution Time) or minimum prices shall have been
established on either such exchange or NASDAQ, (ii) a banking moratorium shall
have been declared either by Federal or New York State authorities or (iii)
there shall have occurred any outbreak or escalation of hostilities, declaration
by the United States of a national emergency or war or other calamity or crisis
the effect of which on financial markets are such as to make it, in the judgment
of the Initial Purchasers, impracticable or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the Final Offering
Memorandum.
11. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Initial Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Initial Purchasers or the Company
or any of the officers, directors or controlling persons referred to in Section
8 hereof. and will survive delivery of and payment for the Securities. The
provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Initial Purchasers, will be
mailed, delivered or sent by facsimile (212-892-7272) and confirmed to them,
care of Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue,
New York, New York 10172; or, if sent to the Company, will be mailed, delivered
or
32
<PAGE>
sent by facsimile (212-906-8497) and confirmed to it at 110 East 59th Street,
26th Floor, New York, New York 10022, attention: General Counsel.
13. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and,
except as expressly set forth in Section 5(h) hereof, no other person will have
any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed
--------------
in accordance with the laws of the State of New York.
15. Business Day. For purposes of this Agreement, "business day"
------------
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which banking institutions in The City of New York, New York are authorized not
to open or are not obligated by law, executive order or regulation to open.
16. Agreement Among Initial Purchasers. Each of the Initial
----------------------------------
Purchasers listed on Schedule I hereto agrees, by execution of this Agreement,
that the IPMA Agreement Among Managers Version I (New York Law Version) (the
"IPMA Agreement") shall be applicable to the relationship among such Initial
Purchasers in connection with this Agreement and, except as expressly specified
in this Agreement, the IPMA Recommendations shall not apply. In the event that
the terms of the IPMA Agreement are inconsistent with the terms of this
Agreement, the provisions of this Agreement shall apply. Donaldson, Lufkin &
Jenrette International and Morgan Stanley & Co. International Limited are,
together, the "Lead Manager" for purposes of the IPMA Agreement; provided,
however, that for the purposes of Section 5 (Stabilisation) of the IPMA
Agreement, Morgan Stanley & Co. International Limited is the "Lead Manager."
Each of the Initial Purchasers listed on Schedule II hereto agrees, by
execution of this Agreement, that the Master Agreement Among Underwriters, dated
March 1, 1993, with Donaldson, Lufkin & Jenrette Securities Corporation shall be
applicable to the relationship among such Initial Purchasers in connection with
this Agreement.
17. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
33
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement. please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your acceptance shall represent a binding agreement between
the Company and the Initial Purchasers.
Very truly yours,
NTL INCORPORATED
By: /s/ Richard J. Lubasch
-------------------------------------
Name: Richard J. Lubasch
Title: Senior V.P. and Gen. Counsel
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL
By: /s/ P.O. Masmejean
-------------------------------------
Name: P.O. Masmejean
Title: Managing Director
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Michael J. Connelly
-------------------------------------
Name: Michael J. Connelly
Title: Managing Director
34
<PAGE>
MORGAN STANLEY & CO.
INTERNATIONAL LIMITED
By: /s/ John S. Wotowicz
-------------------------------------
Name: John S. Wotowicz
Title: Executive Director
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Jeffrey A. Sine
-------------------------------------
Name: Jeffrey A. Sine
Title: Managing Director
CHASE SECURITIES INC.
By: /s/ David V. Fass
-------------------------------------
Name: David V. Fass
Title:
BT ALEX. BROWN INTERNATIONAL,
DIVISION OF BANKERS TRUST
INTERNATIONAL PLC
By: /s/ Jeffrey W. Bennett
-------------------------------------
Name: Jeffrey W. Bennett
Title: Managing Director
BT ALEX. BROWN INCORPORATED
By: /s/ A. Penn
-------------------------------------
Name: A. Penn
Title: Managing Director
35
<PAGE>
SALOMON BROTHERS INTERNATIONAL LIMITED
By: /s/ Dominic Leporp
-------------------------------------
Name: Dominic Leporp
Title: Managing Director
SALOMON BROTHERS INC
By: /s/ Richard C. Zogheb
-------------------------------------
Name: Richard C. Zogheb
Title: Vice President
36
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount Principal Amount of
of Sterling Sterling Deferred
Senior Notes Coupon Notes
Initial Purchasers to be Purchased to be Purchased
- ------------------ --------------- ---------------
<S> <C> <C>
Donaldson, Lufkin & Jenrette
International................................. (Pounds)43,750,000 (Pounds)111,507,165
Morgan Stanley & Co. International
Limited....................................... 43,750,000 111,507,165
BT Alex. Brown International, Division of
Bankers Trust International PLC................ 12,500,000 25,661,890
Chase Securities Inc............................ 12,500,000 25,661,890
Salomon Brothers International
Limited....................................... 12,500,000 25,661,890
------------------- -------------------
Total.............................. (Pounds)125,000,000 (Pounds)300,000,000
=================== ===================
</TABLE>
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Principal Amount of USD
Deferred Coupon Notes
Initial Purchasers to be Purchased
- ------------------ ---------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation........................ $ 503,896,539
Morgan Stanley & Co. Incorporated............... 503,896,539
BT Alex. Brown Incorporated..................... 97,402,307
Chase Securities Inc............................ 97,402,307
Salomon Brothers Inc............................ 97,402,307
--------------
Total.............................. $1,300,000,000
==============
</TABLE>
<PAGE>
SCHEDULE III
1. Amended and Restated Agreement of Reorganization and Plan of Merger, dated
as of May 28, 1993, among the Company, OCOM Corporation and CableTel
Merger, Inc.
2. Rights Agreement dated as of October 1, 1993 between the Company and
Continental Stock Transfer & Trust Company, as Rights Agent.
3. Indenture dated as of October 1, 1993 between the Company and the Trustee,
governing the Company's 10-7/8% Senior Deferred Coupon Notes Due 2003, as
amended by a First Supplemental Indenture dated as of January 23, 1996.
4. Indenture dated as of April 20, 1995 between the Company and the Trustee,
governing the Company's 12-3/4% Senior Deferred Coupon Notes Due 2005, as
amended by a First Supplemental Indenture dated as of January 22, 1996.
5. Indenture dated as of January 30, 1996 between the Company and the Trustee,
governing the Company's 11-1/2 % Senior Deferred Coupon Notes Due 2006.
6. Indenture dated as of April 20, 1995 between the Company and the Trustee
governing the Company's 7.5 % Convertible Subordinated Notes Due 2005.
7. Indenture dated as of June 12, 1996 between the Company and the Trustee
governing the Company's 7% Convertible Subordinated Notes Due 2008.
8. Indenture dated as of February 12, 1997 between the Company and the Trustee
governing the Company's 10% Senior Notes Due 2007.
9. Warrants to Purchase Common Stock issued by the Company to various persons
in the form included as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
10. NTL, Inc. 1993 Stock Option Plan.
11. NTL, Inc. 1993 Non-Employee Director Stock Option Plan.
12. OCOM Corporation 1991 Stock Option Plan.
13. Consulting Agreement between the Company and Insight Communications
Company, L.P.
<PAGE>
14. Non-Competition Agreements between the Company and various persons in the
form included as an exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
15. Credit Facility between the Company and The Chase Manhattan Bank, dated as
of October 17, 1997, as amended by that certain letter agreement, dated as
of March 6, 1998.
2
<PAGE>
Exhibit 12.1
<TABLE>
<CAPTION>
March 31 December 31
----------- ----------------------------------------------------------------------------
1996 1997 1996 1995 1994 1993
----------- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest $58,058,000 $209,340,000 $147,326,000 $40,562,000 $15,316,000 $2,950,000
Amortization of debt expense 1,761,000 7,831,000 8,873,000 1,424,000 502,000 117,000
Interest portion of rental expense 1,504,000 6,016,000 4,957,000 647,000 369,000 66,000
----------- ------------ ------------ ----------- ----------- ----------
$61,323,000 $223,187,000 $161,156,000 $42,633,000 $16,187,000 $3,133,000
============ =========== =========== ==========
Preferred Stock Dividend Requirements 3,638,000 11,978,000
----------- ------------
Combined Fixed Charges and Preferred
Stock Dividends $64,961,000 $235,165,000
=========== ============
Earnings:
Income (loss) from operations ($93,672,000) ($348,648,000) ($246,801,000) ($93,262,000) ($27,943,000) ($10,431,000)
Fixed charges per above 61,323,000 223,187,000 161,156,000 42,633,000 16,187,000 3,133,000
Less: Capitalized interest (911,000) (6,770,000) (10,294,000) (12,183,000) (3,906,000)
----------- ------------ ------------ ----------- ----------- ----------
($33,260,000) ($132,231,000) ($ 95,939,000) ($62,812,000) ($15,662,000) ($ 7,298,000)
=========== ============ ============ =========== =========== ===========
Ratio of Earnings to Fixed
Charges(1) -- -- -- -- -- --
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends(2) -- --
</TABLE>
The ratio of earnings to fixed charges and combined fixed charges and preferred
stock dividends is not meaningful for the periods.
(1) For the three months ended March 31, 1998 and the years ended December 31,
1997, 1996, 1995, 1994 and 1993, the deficit of earnings to fixed
charges was $94,583,000, $355,418,000, $257,095,000, $105,445,000,
$31,849,000 and $10,431,000, respectively.
(2) The deficit of earnings to combined fixed charges and preferred stock
dividends for the three months ended March 31, 1998 and the year ended
December 31, 1997 and $98,221,000 and $367,396,000, respectively.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated March 20, 1998, in the Registration Statement
(Form S-4) and related Prospectus of NTL Incorporated for the registration of
125,000,000 pound sterling of 9 1/2% Series B Senior Notes Due 2008, 300,000,000
pound sterling of 10 3/4% Series B Senior Deferred Coupon Notes Due 2008, and
$1,300,000,000 of 9 3/4% Series B Senior Deferred Coupon Notes Due 2008.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
June 4, 1998
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of NTL Incorporated on
Form S-4 of our report dated February 27, 1998, appearing in the Prospectus,
which is part of this Registration Statement, on the consolidated financial
statements as of December 31, 1997 and 1996 and for each of the three years in
the period ended December 31, 1997 of Comcast UK Cable Partners Limited and
subsidiaries.
We also consent to the reference to us under the headings "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
June 4, 1998
<PAGE>
Exhibit 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of NTL Incorporated on Form
S-4 of our report dated February 27, 1998 (March 16, 1998 as to Note 3),
appearing in the Prospectus, which is part of this Registration Statement, on
the consolidated financial statements as of December 31, 1997 and 1996 and for
each of the three years in the period ended December 31, 1997 of Birmingham
Cable Corporation Limited and subsidiaries.
We also consent to the reference to us under the headings "Experts" in such
Prospectus.
/s/ Deloitte & Touche
Birmingham, England
June 4, 1998
<PAGE>
Exhibit 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of NTL Incorporated on Form
S-4 of our report dated February 27, 1998, appearing in the Prospectus, which is
part of this Registration Statement, on the consolidated financial statements as
of December 31, 1997 and 1996 and for each of the three years in the period
ended December 31, 1997 of Cable London PLC and subsidiaries.
We also consent to the reference to us under the headings "Experts" in such
Prospectus.
/s/ Deloitte & Touche
London, England
June 4, 1998
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
-------
-------------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
NTL INCORPORATED
(Exact name of obligor as specified in its charter)
Delaware 52-1822078
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
110 East 59th Street, 26th Floor
NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
---------------------------------------------
9 1/2% SENIOR NOTES DUE 2008
(Title of the indenture securities)
---------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 7th day of April 1998.
THE CHASE MANHATTAN BANK
By /s/ Andrew M. Deck
--------------------------------------
Andrew M. Deck
Vice President
-3-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin................................ $ 12,428
Interest-bearing balances........................ 3,428
Securities:........................................
Held to maturity securities........................ 2,561
Available for sale securities...................... 43,058
Federal funds sold and securities purchased under
agreements to resell............................. 29,633
Loans and lease financing receivables:
Loans and leases, net of unearned income....... $129,260
Less: Allowance for loan and lease losses........ 2,783
Less: Allocated transfer risk reserve............ 0
Loans and leases, net of unearned income,
allowance, and reserve........................... 126,477
Trading Assets..................................... 62,575
Premises and fixed assets (including capitalized
leases).......................................... 2,943
Other real estate owned............................ 295
Investments in unconsolidated subsidiaries and
associated companies............................. 231
Customers' liability to this bank on acceptances
outstanding...................................... 1,698
Intangible assets.................................. 1,466
Other assets....................................... 10,268
--------
TOTAL ASSETS....................................... $297,061
========
</TABLE>
-4-
<PAGE>
LIABILITIES
<TABLE>
<CAPTION>
<S> <C>
Deposits
In domestic offices...................................... $ 94,524
Noninterest-bearing...................................... $ 39,487
Interest-bearing......................................... 55,037
--------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's................................... 71,162
Noninterest-bearing...................................... $ 3,205
Interest-bearing......................................... 67,957
Federal funds purchased and securities sold under
agreements to repurchase................................... 43,181
Demand notes issued to the U.S. Treasury................... 1,000
Trading liabilities........................................ 48,903
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less...........
3,599 With a remaining maturity of more than one year
through three years................................. 253
With a remaining maturity of more than three years....... 132
Bank's liability on acceptances executed and outstanding 1,698
Subordinated notes and debentures.......................... 5,715
Other liabilities.......................................... 9,896
TOTAL LIABILITIES.......................................... 280,063
--------
</TABLE>
EQUITY CAPITAL
<TABLE>
<CAPTION>
<S> <C>
Perpetual preferred stock and related surplus 0
Common stock............................................... 1,211
Surplus (exclude all surplus related to preferred stock).. 10,291
Undivided profits and capital reserves..................... 5,502
Net unrealized holding gains (losses)
on available-for-sale securities........................... (22)
Cumulative foreign currency translation adjustments........ 16
TOTAL EQUITY CAPITAL....................................... 16,998
--------
TOTAL LIABILITIES AND EQUITY CAPITAL....................... $297,061
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
<PAGE>
EXHIBIT 25.2
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
---------
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
NTL INCORPORATED
(Exact name of obligor as specified in its charter)
Delaware 52-1822078
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
110 East 59th Street, 26th Floor
NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
-----------
9 3/4% SENIOR DEFERRED COUPON NOTES DUE 2008
(Title of the indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 7th day of April 1998.
THE CHASE MANHATTAN BANK
By /s/ Andrew M. Deck
-------------------------------------
Andrew M. Deck
Vice President
-3-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS
ASSETS IN MILLIONS
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin................................ $ 12,428
Interest-bearing balances........................ 3,428
Securities:........................................
Held to maturity securities........................ 2,561
Available for sale securities...................... 43,058
Federal funds sold and securities purchased under
agreements to resell............................. 29,633
Loans and lease financing receivables:
Loans and leases, net of unearned income......... $129,260
Less: Allowance for loan and lease losses........ 2,783
Less: Allocated transfer risk reserve............ 0
--------
Loans and leases, net of unearned income,
allowance, and reserve........................... 126,477
Trading Assets..................................... 62,575
Premises and fixed assets (including capitalized
leases).......................................... 2,943
Other real estate owned............................ 295
Investments in unconsolidated subsidiaries and
associated companies............................. 231
Customers' liability to this bank on acceptances
outstanding...................................... 1,698
Intangible assets.................................. 1,466
Other assets....................................... 10,268
--------
TOTAL ASSETS....................................... $297,061
========
-4-
<PAGE>
LIABILITIES
Deposits
In domestic offices..................................... $ 94,524
Noninterest-bearing..................................... $ 39,487
Interest-bearing........................................ 55,037
--------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's.................................. 71,162
Noninterest-bearing..................................... $3,205
Interest-bearing........................................ 67,957
Federal funds purchased and securities sold under agree-
ments to repurchase....................................... 43,181
Demand notes issued to the U.S. Treasury.................. 1,000
Trading liabilities....................................... 48,903
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less........... 3,599
With a remaining maturity of more than one year
through three years................................. 253
With a remaining maturity of more than three years...... 132
Bank's liability on acceptances executed and outstanding 1,698
Subordinated notes and debentures......................... 5,715
Other liabilities......................................... 9,896
TOTAL LIABILITIES......................................... 280,063
--------
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock.............................................. 1,211
Surplus (exclude all surplus related to preferred stock).. 10,291
Undivided profits and capital reserves.................... 5,502
Net unrealized holding gains (losses)
on available-for-sale securities.......................... (22)
Cumulative foreign currency translation adjustments....... 16
TOTAL EQUITY CAPITAL...................................... 16,998
--------
TOTAL LIABILITIES AND EQUITY CAPITAL...................... $297,061
========
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
<PAGE>
EXHIBIT 25.3
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
--------
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
NTL INCORPORATED
(Exact name of obligor as specified in its charter)
Delaware 52-1822078
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
110 East 59th Street, 26th Floor
NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
-----------
10 3/4% SENIOR DEFERRED COUPON NOTES DUE 2008
(Title of the indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New
York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 7th day of April 1998.
THE CHASE MANHATTAN BANK
By /s/ Andrew M. Deck
---------------------------------------
Andrew M. Deck
Vice President
-3-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS
ASSETS IN MILLIONS
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin........................................... $ 12,428
Interest-bearing balances................................... 3,428
Securities:........................................
Held to maturity securities...................................... 2,561
Available for sale securities.................................... 43,058
Federal funds sold and securities purchased under
agreements to resell........................................ 29,633
Loans and lease financing receivables:
Loans and leases, net of unearned income.................... $129,260
Less: Allowance for loan and lease losses................... 2,783
Less: Allocated transfer risk reserve....................... 0
--------
Loans and leases, net of unearned income,
allowance, and reserve...................................... 126,477
Trading Assets................................................... 62,575
Premises and fixed assets (including capitalized
leases)..................................................... 2,943
Other real estate owned.......................................... 295
Investments in unconsolidated subsidiaries and
associated companies........................................ 231
Customers' liability to this bank on acceptances
outstanding................................................. 1,698
Intangible assets................................................ 1,466
Other assets..................................................... 10,268
--------
TOTAL ASSETS..................................................... $297,061
========
-4-
<PAGE>
LIABILITIES
Deposits
In domestic offices..................................... $ 94,524
Noninterest-bearing..................................... $ 39,487
Interest-bearing........................................ 55,037
--------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's.................................. 71,162
Noninterest-bearing..................................... $ 3,205
Interest-bearing........................................ 67,957
Federal funds purchased and securities sold under agree-
ments to repurchase....................................... 43,181
Demand notes issued to the U.S. Treasury.................. 1,000
Trading liabilities....................................... 48,903
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less........... 3,599
With a remaining maturity of more than one year
through three years................................ 253
With a remaining maturity of more than three years.. 132
Bank's liability on acceptances executed and outstanding 1,698
Subordinated notes and debentures......................... 5,715
Other liabilities......................................... 9,896
TOTAL LIABILITIES......................................... 280,063
--------
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock............................................... 1,211
Surplus (exclude all surplus related to preferred stock).. 10,291
Undivided profits and capital reserves..................... 5,502
Net unrealized holding gains (losses)
on available-for-sale securities........................... (22)
Cumulative foreign currency translation adjustments........ 16
TOTAL EQUITY CAPITAL....................................... 16,998
--------
TOTAL LIABILITIES AND EQUITY CAPITAL....................... $297,061
========
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
NTL INCORPORATED
OFFER FOR ALL OUTSTANDING
9 1/2% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
9 1/2% SERIES B SENIOR NOTES DUE 2008
AND
10 3/4% SENIOR DEFERRED COUPON NOTES DUE 2008
IN EXCHANGE FOR
10 3/4% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2008
AND
9 3/4% SENIOR DEFERRED COUPON NOTES DUE 2008
IN EXCHANGE FOR
9 3/4% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2008
PURSUANT TO THE PROSPECTUS, DATED , 1998
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
Delivery To: The Chase Manhattan Bank, as Exchange Agent
In New York
By Facsimile: By Mail, By Hand and Overnight Confirm by
Courier: Telephone:
(212) 638-7380
(212) 638-7381 The Chase Manhattan Bank Carlos Esteves: (212)
Corporate Trust-Securities 638-0828
Window (212) 638-
Room 234-North Building 0454
55 Water Street
New York, New York 10041
In Luxembourg
By Facsimile: By Mail, By Hand and Overnight Confirm by Telephone:
Courier:
(352) 46 26 Veronique Cridel: (352)
85380 Chase Manhattan Bank Luxembourg 46 26 85284
S.A.
5 Rue Plaetis
L-2338, Luxembourg
Delivery of this instrument to an address other than as set forth above, or
transmission of this Letter of Transmittal via facsimile other than as set
forth above, will not constitute a valid delivery of this Letter of
Transmittal.
The undersigned acknowledges that he or she has received and reviewed a
prospectus dated , 1998 (the "Prospectus") of NTL Incorporated, a Delaware
corporation (the "Company"), and this letter of transmittal (the "Letter"),
which together constitute the Company's offer (the "Exchange Offer") to
exchange (i) an aggregate principal amount of up to (Pounds)125,000,000 of 9
1/2% Series B Senior Notes Due 2008 (the "New Sterling Senior Notes") of the
Company for a like principal amount of the issued and outstanding 9 1/2%
Senior Notes Due 2008 (the "Old Sterling Senior Notes"), (ii) an aggregate
principal amount at maturity of up to (Pounds)300,000,000 of 10 3/4% Series B
Senior Deferred Coupon Notes Due 2008 (the "New Sterling Deferred Coupon
Notes") of the Company for a like principal amount of the issued and
outstanding 10 3/4% Senior Deferred Coupon Notes Due 2008 (the "Old Sterling
Deferred Coupon Notes"), and (iii) an aggregate principal amount at maturity
of up to $1,300,000,000 of 9 3/4% Series B Senior Deferred Coupon Notes Due
2008 (the "New USD Deferred Coupon Notes" and together with the New Sterling
Senior Notes and the New Sterling Deferred Coupon Notes, the "New Notes") of
the Company for a like principal amount of the issued and outstanding 9 3/4%
Senior Deferred Coupon Notes Due 2008 (the "Old USD Deferred Coupon Notes" and
together with the
<PAGE>
Old Sterling Senior Notes and the Old Sterling Deferred Coupon Notes, the "Old
Notes" and together with the New Notes, the "Notes") of the Company from the
holders thereof. Capitalized terms used but not defined herein have the
meanings given to them in the Prospectus.
For each Old Note accepted for exchange and not validly withdrawn, the holder
of such Old Note will receive a New Note having (i) in the case of New Sterling
Senior Notes, a principal amount equal to that of the surrendered Old Sterling
Senior Notes, or (ii) in the case of New Sterling Deferred Coupon Notes or New
USD Deferred Coupon Notes, a principal amount at maturity equal to the
surrendered Old Sterling Deferred Coupon Notes or Old USD Deferred Coupon
Notes, as applicable. If the Exchange Offer is not consummated by January 17,
1999, interest will accrue (in addition to the stated interest on the Old
Sterling Senior Notes and in addition to the accrual of the original issue
discount and stated interest on the Old Sterling Deferred Coupon Notes and the
Old USD Deferred Coupon Notes) from and including January 18, 1999. Such
additional interest (the "Special Interest"), if any, will be payable in cash
semiannually in arrears each April 1 and October 1, to holders of record on the
immediately preceding March 15 and September 15, respectively, at a rate per
annum equal to 0.50% of the principal amount of the Old Sterling Senior Notes
or the Accreted Value of the Old Sterling Deferred Coupon Notes or Old USD
Deferred Coupon Notes, as the case may be (determined daily). The aggregate
amount of Special Interest payable pursuant to the above provisions will in no
event exceed 1.50% per annum of the principal amount of the Old Sterling Senior
Notes or the Accreted Value of the Old Sterling Deferred Coupon Notes or Old
USD Deferred Coupon Notes, as the case may be (determined daily). Upon the
consummation of the Exchange Offer after January 17, 1999, the Special Interest
payable on the Old Notes from the date of such consummation will cease to
accrue. Following the consummation of the Exchange Offer, the interest terms
shall revert to the original terms set forth in the Notes. Except as otherwise
provided in the Prospectus, Holders of Old Notes accepted for exchange will be
deemed to have waived the right to receive any other payments or accrued
interest, if any, on the Old Notes. The Company reserves the right, at any time
or from time to time, to extend the Exchange Offer at its discretion, in which
event the term "Expiration Date" shall mean the latest time and date to which
the Exchange Offer is extended. The Company shall notify the holders of the Old
Notes of any extension by means of a press release or other public announcement
prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
This Letter is to be completed by a holder of Old Notes either if
certificates for such Old Notes are to be forwarded herewith or if a tender is
to be made by book-entry transfer to the account maintained by the Exchange
Agent at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in the Prospectus under "The Exchange
Offer--Book-Entry Transfer" and an Agent's Message is not delivered. Tenders by
book-entry transfer may also be made by delivering an Agent's Message in lieu
of this Letter. The term "Agent's Message" means a message, transmitted by the
Book-Entry Transfer Facility to and received by the Exchange Agent and forming
a part of a Book-Entry Confirmation (as defined below), which states that the
Book-Entry Transfer Facility has received an express acknowledgment from the
tendering Participant, which acknowledgment states that such Participant has
received and agrees to be bound by, and makes each of the representations and
warranties contained in, this Letter and that the Company may enforce this
Letter against such Participant. Holders of Old Notes whose certificates are
not immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility (a "Book-Entry
Confirmation") and all other documents required by this Letter to the Exchange
Agent on or prior to the Expiration Date, must tender their Old Notes according
to the guaranteed delivery procedures set forth in the Prospectus under "The
Exchange Offer--Guaranteed Delivery Procedures." See Instruction 1. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
<PAGE>
List and check the appropriate box below the Old Notes to which this Letter
relates. If the space provided below is inadequate, the certificate numbers and
principal amount at maturity of Old Notes should be listed on a separate signed
schedule affixed hereto.
DESCRIPTION OF OLD NOTES
<TABLE>
- -------------------------------------------------------------------------------------------
<CAPTION>
1 2 3
- -------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL PRINCIPAL
AMOUNT AT AMOUNT
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE MATURITY OF AT MATURITY
(PLEASE FILL IN, IF BLANK) NUMBER(S)* OLD NOTE(S) TENDERED**
- -------------------------------------------------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
<S> <C> <C> <C>
TOTAL
- -------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to
have tendered ALL of the Old Notes represented by the Old Notes
indicated in column 2. See Instruction 2. Old Notes tendered hereby
must be in denominations of principal amount at maturity of $1,000 or
(Pounds)1,000 and any integral multiple thereof. See Instruction 1.
[_]CHECK HERE IF OLD STERLING SENIOR NOTES ARE BEING TENDERED
[_]CHECK HERE IF OLD STERLING DEFERRED COUPON NOTES ARE BEING TENDERED
[_]CHECK HERE IF OLD USD DEFERRED COUPON NOTES ARE BEING TENDERED
----------------
[_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________________________
Account Number ___________________________ Transaction Code Number ________
By crediting the Old Notes to the Exchange Agent's account at the Book-Entry
Transfer Facility in accordance with the Book-Entry Transfer Facility's
Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP
procedures with respect to the Exchange Offer, including transmitting to the
Exchange Agent a computer-generated message (an "Agent's Message") in which the
holder of the Old Notes acknowledges and agrees to be bound by the terms of, and
makes the representations and warranties contained in, this Letter, the
participant in the Book-Entry Transfer Facility confirms on behalf of itself and
the beneficial owners of such Old Notes all provisions of this Letter (including
any representations and warranties) applicable to it and such beneficial owner
as fully as if it had completed the information required herein and executed and
transmitted this Letter to the Exchange Agent.
[_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s) _____________________________________________
Window Ticket Number (if any) _______________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Name of Institution which guaranteed delivery _______________________________
IF DELIVERY BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number ___________________________ Transaction Code Number ________
Name of Tendering Institution _______________________________________________
<PAGE>
[_] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _______________________________________________________________________
Address: ____________________________________________________________________
______________________________________________________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount at
maturity of Old Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact with full power of substitution, for purposes of
delivering this Letter and the Old Notes to the Company. The Power of Attorney
granted in this paragraph shall be deemed irrevocable from and after the
Expiration Date and coupled with an interest. The undersigned hereby further
represents that any New Notes acquired in exchange for Old Notes tendered hereby
will have been acquired in the ordinary course of business of the person
receiving such New Notes, whether or not such person is the undersigned, that
neither the holder of such Old Notes nor any such other person is engaged in, or
intends to engage in, or has an arrangement or understanding with any person to
participate in, the distribution (within the meaning of the Securities Act of
1933, as amended (the "Securities Act")) of such New Notes and that neither the
holder of such Old Notes nor any such other person is an "affiliate," as defined
in Rule 405 under the Securities Act, of the Company.
The undersigned also acknowledges that this Exchange Offer is being made by
the Company in reliance on an interpretation by the staff of the Securities and
Exchange Commission (the "SEC"), as set forth in no-action letters issued to
third parties, that the New Notes issued in exchange for the Old Notes pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution (within the
meaning of the Securities Act) of such New Notes. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, and has no arrangement or understanding with any person
to participate in, a distribution (within the meaning of the Securities Act) of
New Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. The undersigned
acknowledges that in reliance on an interpretation by the staff of the SEC, a
broker-dealer may fulfill his prospectus delivery requirements with respect to
the New Notes (other than a resale of an unsold allotment from the original sale
of the Old Notes) with the Prospectus which constitutes part of this Exchange
Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder
<PAGE>
shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. The tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights"
section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please issue the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not exchanged) in the
name of the undersigned or, in the case of a book-entry delivery of Old Notes,
please credit the account indicated above maintained at the Book-Entry Transfer
Facility. Similarly, unless otherwise indicated under the box entitled "Special
Delivery Instructions" below, please send the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
to the undersigned at the address shown above in the box entitled "Description
of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if To be completed ONLY if
certificates for Old Notes not certificates for Old Notes not
exchanged and/or New Notes are exchanged and/or New Notes are
to be issued in the name of to be sent to someone other than
someone other than the person or the person or persons whose
persons whose signature(s) signature(s) appear(s) on this
appear(s) on the Letter below, Letter below or to such person
or if Old Notes delivered by or persons at an address other
book-entry transfer which are than shown in the box entitled
not accepted for exchange are to "Description of Old Notes" on
be returned by credit to an this Letter above.
account maintained at the Book-
Entry Transfer Facility other
than the account indicated
above.
Mail: New Notes and/or Old
Notes to:
Name(s)..........................
Issue: New Notes and/or Old (PLEASE TYPE OR PRINT)
Notes to:
.................................
Name(s).......................... (PLEASE TYPE OR PRINT)
(PLEASE TYPE OR PRINT)
Address..........................
.................................
(PLEASE TYPE OR PRINT) .................................
(ZIP CODE)
Address..........................
.................................
(ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
[_]Credit unexchanged Old Notes
delivered by book-entry
transfer to the Book-Entry
Transfer Facility account set
forth below.
_________________________________
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
Dated:
x ........................ ................ , 1998
x ........................ ................ , 1998
SIGNATURE(S) OF OWNER DATE
Area Code and Telephone Number....................
This Letter must be signed by the registered holder(s)
as the name(s) appear(s) on the certificate(s) for the
Old Notes hereby tendered or on a security position
listing or by any person(s) authorized to become
registered holder(s) by endorsements and documents
transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other
person acting in a fiduciary or representative capacity,
please set forth full title. See Instruction 3.
Name(s):..........................................
..................................................
(PLEASE TYPE OR PRINT)
Capacity:.........................................
Address:..........................................
..................................................
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by an Eligible
Institution: .....................................
(AUTHORIZED SIGNATURE)
..................................................
(TITLE)
..................................................
(NAME AND FIRM)
Dated:
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE
9 1/2% SENIOR NOTES DUE 2008
IN EXCHANGE FOR THE
9 1/2% SERIES B SENIOR NOTES DUE 2008
AND
10 3/4% SENIOR DEFERRED COUPON NOTES DUE 2008
IN EXCHANGE FOR
10 3/4% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2008
AND
9 3/4% SENIOR DEFERRED COUPON NOTES DUE 2008
IN EXCHANGE FOR
9 3/4% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2008
OF NTL INCORPORATED
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by holders (which term, for purposes of the
Exchange Offer, includes any participant in the Book-Entry Transfer Facility
system whose name appears on a security position listing as the holder of such
Old Notes) either if certificates are to be forwarded herewith or if tenders
are to be made pursuant to the procedures for delivery by book-entry transfer
set forth in the Prospectus under "The Exchange Offer--Book-Entry Transfer"
and an Agent's Message is not delivered. Tenders by book-entry transfer may
also be made by delivering an Agent's Message in lieu of this Letter. The term
"Agent's Message" means a message, transmitted by the Book-Entry Transfer
Facility to and received by the Exchange Agent and forming a part of a Book-
Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the tendering Participant, which
acknowledgment states that such Participant has received and agrees to be
bound by, and makes the representations and warranties contained in, this
Letter and that the Company may enforce this Letter against such Participant.
Certificates for all physically tendered Old Notes, or Book-Entry
Confirmation, as the case may be, as well as a properly completed and duly
executed Letter (or facsimile hereof or Agent's Message in lieu thereof) and
any other documents required by this Letter, must be received by the Exchange
Agent at the address set forth herein on or prior to the Expiration Date, or
the tendering holder must comply with the guaranteed delivery procedures set
forth below. Old Notes tendered hereby must be in denominations of principal
amount at maturity of $1,000 or (Pounds)1,000 and any integral multiple
thereof.
Holders whose certificates for Old Notes are not immediately available or
who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old
Notes pursuant to the guaranteed delivery procedures set forth in the
Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures."
Pursuant to such procedures, (i) such tender must be made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent must
receive from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Company (by telegram, telex, facsimile transmission, mail or hand delivery),
setting forth the name and address of the holder of Old Notes and the amount
of Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that within five New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Notes, or a Book-Entry
Confirmation, together with a properly completed and duly executed Letter (or
facsimile thereof or Agent's Message in lieu thereof) with any required
signature guarantees and any other documents required by the Letter will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all physically tendered Old Notes, in the proper form for
transfer, or Book-Entry Confirmation, as the case may be, together with a
properly completed and duly executed Letter (or facsimile thereof or Agent's
Message in lieu thereof) with any required signature guarantees and all other
documents required by this Letter, are received by the Exchange Agent within
five NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Old Notes are sent by mail, it is suggested that the
mailing be made sufficiently in
<PAGE>
advance of the Expiration Date to permit delivery to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date.
See the Prospectus under "The Exchange Offer."
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Old Notes evidenced by a submitted certificate are
to be tendered, the tendering holder(s) should fill in the aggregate principal
amount of Old Notes to be tendered in the box above entitled "Description of
Old Notes--Principal Amount Tendered." A reissued certificate representing the
balance of nontendered Old Notes will be sent to such tendering holder, unless
otherwise provided in the appropriate box on this letter, promptly after the
Expiration Date. ALL OF THE OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE
DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED.
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the Holder of the Old Notes tendered hereby, the
signature must correspond exactly with the name as written on the face of the
certificates or on the Book-Entry Transfer Facility's security position
listing as the holder of such Old Notes without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be
issued, or any untendered Old Notes are to be reissued, to a person other than
the registered holder, then endorsements of any certificates transmitted
hereby or separate bond powers are required. Signatures on such certificate(s)
or bond powers must be guaranteed by a participant in a securities transfer
association recognized signature program.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) or bond powers must
be guaranteed by an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must
be submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER
OF A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST
COMPANY HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE INSTITUTION,
PROVIDED THE OLD NOTES ARE TENDERED: (I) BY A REGISTERED HOLDER OF OLD NOTES
WHO HAS NOT COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR
"SPECIAL DELIVERY INSTRUCTIONS" ON THIS LETTER OR (II) FOR THE ACCOUNT OF AN
ELIGIBLE INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTION.
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer
and/or substitute certificates evidencing Old Notes not exchanged are to be
issued or sent, if different from the name or address of the person signing
this Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must
<PAGE>
also be indicated. Holders tendering Old Notes by book-entry transfer may
request that Old Notes not exchanged be credited to such account maintained at
the Book-Entry Transfer Facility as such holder may designate hereon. If no
such instructions are given, such Old Notes not exchanged will be returned to
the name or address of the person signing this Letter.
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose Old
Notes are accepted for exchange must provide the Company (as payor) with such
holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below, which in the case of a tendering holder who is an individual, is his or
her social security number. If the Company is not provided with the current
TIN or an adequate basis for an exemption, such tendering holder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
delivery to such tendering holder of New Notes may be subject to backup
withholding in an amount equal to 31% of all reportable payments made after
the exchange. If withholding results in an overpayment for taxes, a refund may
be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines")
for additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9" set forth
below, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN) and that (i) the holder is exempt from backup withholding,
(ii) the holder has not been notified by the Internal Revenue Service that
such holder is subject to a backup withholding as a result of a failure to
report all interest or dividends or (iii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup
withholding. If the tendering holder of Old Notes is a nonresident alien or
foreign entity not subject to backup withholding, such holder must give the
Company a completed Form W-8, Certificate of Foreign Status. These forms may
be obtained from the Exchange Agent. If the Old Notes are in more than one
name or are not in the name of the actual owner, such holder should consult
the W-9 Guidelines for information on which the TIN to report. If such holder
does not have a TIN, such holder should consult the W-9 Guidelines for
instructions on applying for a TIN, check the box in Part 2 of the Substitute
Form W-9 and write "applied for" in lieu of its TIN. Note: Checking this box
and writing "applied for" on the form means that such holder has already
applied for a TIN or that such holder intends to apply for one in the near
future. If such holder does not provide its TIN to the Company within 60 days,
backup withholding will begin and continue until such holder furnishes its TIN
to the Company.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it or its order pursuant to the Exchange Offer. If, however,
New Notes and/or substitute Old Notes not exchanged are to be delivered to, or
are to be registered or issued in the name of, any person other than the
registered holder of the Old Notes tendered hereby, or if tendered Old Notes
are registered in the name of any person other than the person signing this
Letter, or if a transfer tax is imposed for any reason other than the transfer
of Old Notes to the Company or its order pursuant to the Exchange Offer, the
amount of any such transfer taxes (whether imposed on the registered holder or
any other person) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering holder.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter or
an Agent's Message in lieu thereof, shall waive any right to receive notice of
the acceptance of their Old Notes for exchange.
<PAGE>
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the addresses indicated above for further
instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the addresses and telephone numbers indicated above.
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: NTL INCORPORATED
- --------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT AND TIN: ____________________
CERTIFY BY SIGNING AND (SOCIAL SECURITY
DATING BELOW. NUMBER OR
EMPLOYER IDENTIFICATION
NUMBER)
SUBSTITUTE
FORM W-9
DEPARTMENT OF
THE TREASURY
INTERNAL ----------------------------------------------------------
REVENUE SERVICE PART 2--TIN APPLIED FOR [_]
----------------------------------------------------------
PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER
("TIN") AND CERTIFICATION
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY
THAT
(1) the number shown on this form is my correct
Taxpayer Identification Number (or I am waiting for
a number to be issued to me).
(2) I am not subject to backup withholding either
because: (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to
backup withholding, and
(3) any other information provided on this form is true
and correct.
SIGNATURE.......................... DATE................
- --------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting of interest or dividends on your tax return and you have not
been notified by the IRS that you are no longer subject to backup
withholding.
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administrative Office
or (b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number by
the time of the exchange, 31 percent of all reportable payments made to me
thereafter will be withheld until I provide a number.
---------------------------------------------- ---------------------
SIGNATURE DATE
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY FOR
NTL INCORPORATED
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of NTL Incorporated (the "Company") made pursuant to a
prospectus dated , 1998 (the "Prospectus"), if certificates for Old
Notes of the Company are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Company prior to 5:00 p.m., New
York City time, on the Expiration Date of the Exchange Offer. Such form may be
delivered or transmitted by telegram, telex, facsimile transmission, mail or
hand delivery to The Chase Manhattan Bank (the "Exchange Agent") as set forth
below. Capitalized terms not defined herein are defined in the Prospectus.
The Exchange Agent is:
In New York
By Mail, By Hand and Overnight By Facsimile:
Courier:
(212) 638-7380
The Chase Manhattan Bank (212) 638-7381
Corporate Trust-Securities Window
Room 234, North Building Confirm by Telephone:
55 Water Street
New York, New York 10041 Carlos Esteves: (212) 638-0828
(212) 638-0454
In Luxembourg
By Mail, By Hand and Overnight By Facsimile:
Courier:
(352) 46 26 85380
Chase Manhattan Bank Luxembourg S.A.
5 Rue Plaetis Confirm by Telephone:
L-2338, Luxembourg
Veronique Cridel: (352) 46 26 85284
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus, the undersigned
hereby tenders to the Company the principal amount of Old Notes set forth
below, pursuant to the guaranteed delivery procedure described in the
Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures."
Principal Amount at Maturity of Old Notes
Tendered:*
$____________________________________
Certificates Nos. (if available):
_____________________________________ If Old Notes will be delivered by
book-entry transfer to The
Depository Trust Company, provide
account number.
Total Principal Amount at Maturity
Represented by Old Notes
Certificate(s):
Account Number_______________________
$____________________________________
* Must be in denominations of principal amount at maturity of $1,000 or
(Pounds)1,000 and any integral multiple thereof. See Instruction 1 in the
Letter of Transmittal.
[_] CHECK HERE IF OLD STERLING SENIOR NOTES ARE BEING TENDERED
[_] CHECK HERE IF OLD STERLING DEFERRED COUPON NOTES ARE BEING TENDERED
[_] CHECK HERE IF OLD USD DEFERRED COUPON NOTES ARE BEING TENDERED
<PAGE>
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES,
SUCCESSORS AND ASSIGNS OF THE UNDERSIGNED.
PLEASE SIGN HERE
x ___________________________________ _____________________________
x ___________________________________ _____________________________
Signature(s) of Owner(s) or Date
Authorized Signatory
Telephone Number (including area code):___________________
This Notice of Guaranteed Delivery must be signed by the holder(s) of Old
Notes as their name(s) appear(s) on certificates for Old Notes or on a
security position listing, or by person(s) authorized to become registered
holder(s) by endorsement and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title
below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): ___________________________________________________________________
___________________________________________________________________
Capacity: ___________________________________________________________________
Address(es):___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
GUARANTEE
The undersigned, a member of a registered national securities exchange, or a
member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the
United States, hereby guarantees that the certificates representing the
principal amount of Old Notes tendered hereby in proper form for transfer, or
timely confirmation of the book-entry transfer of such Old Notes into the
Exchange Agent's account at The Depository Trust Company pursuant to the
procedures set forth in the Prospectus under "The Exchange Offer--Guaranteed
Delivery Procedures," together with one or more properly completed and duly
executed Letters of Transmittal (or facsimile thereof or Agent's Message in
lieu thereof) and any other documents required by the Letter of Transmittal in
respect of the Old Notes, will be received by the Exchange Agent at the
address set forth above, no later than five New York Stock Exchange trading
days after the date of execution hereof.
_____________________________________ _____________________________________
Name of Firm Authorized Signature
_____________________________________ _____________________________________
Address Title
_____________________________________ Name: _______________________________
Zip Code (Please Type or Print)
Area Code and Tel. No. ______________ Dated: ______________________________
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE>
Exhibit 99.3
NTL INCORPORATED
OFFER FOR ALL OUTSTANDING 9 1/2% SENIOR NOTES DUE 2008 IN EXCHANGE FOR 9 1/2%
SERIES B SENIOR NOTES DUE 2008
AND
10 3/4% SENIOR DEFERRED COUPON NOTES DUE 2008
IN EXCHANGE FOR
10 3/4% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2008
AND
9 3/4% SENIOR DEFERRED COUPON NOTES DUE 2008
IN EXCHANGE FOR
9 3/4% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2008
To Our Clients:
Enclosed for your consideration is a prospectus dated , 1998 (the
"Prospectus"), and the related letter of transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of NTL
Incorporated (the "Company") to exchange (i) an aggregate principal amount of
up to (Pounds)125,000,000 of its 9 1/2% Series B Senior Notes Due 2008 for a
like principal amount of its issued and outstanding 9 1/2% Senior Notes Due
2008 (the "Old Sterling Senior Notes"), (ii) an aggregate principal amount at
maturity of up to (Pounds)300,000,000 of its 10 3/4% Series B Senior Deferred
Coupon Notes Due 2008 for a like principal amount at maturity of its issued
and outstanding 10 3/4% Senior Deferred Coupon Notes Due 2008 (the "Old
Sterling Deferred Coupon Notes"), and (iii) an aggregate principal amount at
maturity of up to $1,300,000,000 of its 9 3/4% Series B Senior Deferred Coupon
Notes Due 2008 for a like principal amount of its issued and outstanding 9
3/4% Senior Deferred Coupon Notes Due 2008 (the "Old USD Deferred Coupon
Notes" and together with the Old Sterling Senior Notes and the Old Sterling
Deferred Coupon Notes, the "Old Notes") upon the terms and subject to the
conditions described in the Prospectus. The Exchange Offer is being made in
order to satisfy certain obligations of the Company contained in the
registration rights agreements in respect of the Old Notes, dated March 13,
1998, by and among the Company and the initial purchasers referred to therein.
This material is being forwarded to you as the beneficial owner of the Old
Notes carried by us in your account but not registered in your name. A tender
of such Old Notes may only be made by us as the holder of record and pursuant
to your instructions.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Notes held by us for your account, pursuant to the terms
and conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in order
to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1998, unless extended by the Company (the
"Expiration Date"). Any Old Notes tendered pursuant to the Exchange Offer may
be withdrawn at any time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus in the section captioned "The Exchange Offer--Certain Conditions
of the Exchange Offer."
3. Any transfer taxes incident to the transfer of Old Notes from the
holder to the Company will be paid by the Company, except as otherwise
provided in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on ,
1998, unless extended by the Company.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. The Letter of Transmittal is furnished to you for information
only and may not be used directly by you to tender Old Notes.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by NTL
Incorporated with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the account
of the undersigned, upon and subject to the terms and conditions set forth in
the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated below:
AGGREGATE PRINCIPAL AMOUNT AT
MATURITY OF OLD NOTES TENDERED
_____________________________________
9 1/2% Senior Notes Due 2008
_____________________________________
10 3/4% Senior Deferred Coupon Notes Due 2008
9 3/4% Senior Deferred Coupon Notes Due 2008
_____________________________________
[_] Please do not tender any Old
Notes held by you for my account. _____________________________________
_____________________________________
Dated: ________________________, 1998 SIGNATURE(S)
_____________________________________
_____________________________________
PLEASE PRINT NAME(S) HERE
_____________________________________
_____________________________________
_____________________________________
ADDRESS(ES)
_____________________________________
AREA CODE AND TELEPHONE NUMBER
_____________________________________
TAX IDENTIFICATION OR SOCIAL
SECURITY NO(S).
None of the Old Notes held by us for your account will be tendered unless we
receive written instructions from you to do so. Unless a specific contrary
instruction is given in the space provided, your signature(s) hereon shall
constitute an instruction to us to tender all the Old Notes held by us for
your account.
2
<PAGE>
Exhibit 99.4
NTL INCORPORATED
OFFER FOR ALL OUTSTANDING 9 1/2% SENIOR NOTES DUE 2008 IN EXCHANGE FOR 9 1/2%
SERIES B SENIOR NOTES DUE 2008
AND
10 3/4% SENIOR DEFERRED COUPON NOTES DUE 2008
IN EXCHANGE FOR
10 3/4% SERIES B SENIOR DEFERRED COUPEN NOTES DUE 2008
AND
9 3/4% SENIOR DEFERRED COUPON NOTES DUE 2008
IN EXCHANGE FOR
9 3/4% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2008
To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
NTL Incorporated (the "Company") is offering, upon and subject to the terms
and conditions set forth in a prospectus dated , 1998 (the "Prospectus"),
and the enclosed letter of transmittal (the "Letter of Transmittal"), to
exchange (the "Exchange Offer") (i) an aggregate principal amount of up to
(Pounds)125,000,000 of its 9 1/2% Series B Senior Notes Due 2008 for a like
principal amount of its issued and outstanding 9 1/2% Senior Notes Due 2008
(the "Old Sterling Senior Notes"), (ii) an aggregate principal amount at
maturity of up to (Pounds)300,000,000 of its 10 3/4% Series B Senior Deferred
Coupon Notes Due 2008 for a like principal amount at maturity of its issued
and outstanding 10 3/4% Senior Deferred Coupon Notes Due 2008 (the "Old
Sterling Deferred Coupon Notes"), and (iii) an aggregate principal amount at
maturity of up to $1,300,000,000 of its 9 3/4% Series B Senior Deferred Coupon
Notes Due 2008 of the Company for a like principal amount at maturity of its
issued and outstanding 9 3/4% Senior Deferred Coupon Notes Due 2008 (the "Old
USD Deferred Coupon Notes" and together with the Old Sterling Senior Notes and
the Old Sterling Deferred Coupon Notes, the "Old Notes"). The Exchange Offer
is being made in order to satisfy certain obligations of the Company contained
in the registration rights agreements in respect of the Old Notes, dated March
13, 1998, by and among the Company and the initial purchasers referred to
therein.
We are requesting that you contact your clients for whom you hold Old Notes
regarding the Exchange Offer. For your information and for forwarding to your
clients for whom you hold Old Notes registered in your name or in the name of
your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated , 1998;
2. The Letter of Transmittal for your use and for the information (or the
use, where relevant) of your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available or time
will not permit all required documents to reach the Exchange Agent prior to
the Expiration Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account
you hold Old Notes registered in your name or the name of your nominee,
with space provided for obtaining such clients' instructions with regard to
the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to The Chase Manhattan Bank, the Exchange
Agent for Old Notes.
<PAGE>
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON 1998, UNLESS EXTENDED BY THE COMPANY (THE
"EXPIRATION DATE"). THE OLD NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY
BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly completed
Letter of Transmittal (or facsimile thereof or Agent's Message in lieu
thereof), with any required signature guarantees and any other required
documents, should be sent to the Exchange Agent and certificates representing
the Old Notes should be delivered to the Exchange Agent, all in accordance
with the instructions set forth in the Letter of Transmittal and the
Prospectus.
If holders of Old Notes wish to tender, but it is impracticable for them to
forward their certificates for Old Notes prior to the expiration of the
Exchange Offer or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures described in the Prospectus under "The Exchange Offer--Guaranteed
Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial banks
and trust companies for reasonable and necessary costs and expenses incurred
by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes pursuant to the Exchange Offer, except
as set forth in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to The
Chase Manhattan Bank, the Exchange Agent for the Old Notes, at its addresses
and telephone numbers set forth on the front of the Letter of Transmittal.
Very truly yours,
NTL Incorporated
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF
EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS
EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
2
