ntl plans £475m share buy back

[thorne1j]

sorry if this has already been posted.

NTL plans £475m shares buy-back
By Emiko Terazono
Published: February 2 2005 02:00 | Last updated: February 2 2005 02:00

NTL, the UK cable operator, is to spend up to £475m in a share buy-back programme. The move follows the sale of its television towers business earlier this week for £1.27bn .
The company, which is expected to merge with Telewest, another UK cable group with which it shares leading stakeholders, intends to complete the shares repurchase within the next six months. It will use a further £500m from the sale to repay debt.
NTL agreed in December to sell its broadcast division, whose towers transmit to leading UK broadcasters, to a consortium led by Australia's Macquarie Communications Infrastructure Group. Emiko Terazono

[Toto]

I has, and you should be

[Chrysalis]

now I am am confused, one min NTL are broke the next they wasting 500million on buying back shares.

Someone explain to me please how they get away with this.

[orangebird]

Originally Posted by Chrysalis

now I am am confused, one min NTL are broke the next they wasting 500million on buying back shares.

Someone explain to me please how they get away with this.

The less shares out there, the less divindends to pay out, the more money ntl get to keep to spend on the business...

[ian@huth]

Originally Posted by orangebird

The less shares out there, the less divindends to pay out, the more money ntl get to keep to spend on the business...

Hmmmm, that might be true if NTLI paid a dividend.

[orangebird]

Originally Posted by ianathuth

Hmmmm, that might be true if NTLI paid a dividend.

I wasn't sure if they did or not... But can't really think of another explanation?

Originally Posted by Chrysalis

now I am am confused, one min NTL are broke the next they wasting 500million on buying back shares.

Someone explain to me please how they get away with this.

Well, in a nutshell, here's how they 'get away with it'...

NTL is basically owned by the banks. The banks did not originally intend to be equity investors in the business (shareholders), they set out give loans which would be repaid with interest, a much more lucrative option and, generally, financially less risky than exposing yourself to the stock market in return for a dividend which is paid *if* the company does well.

However, NTL royally boogered things up for the banks by expanding too fast just before share prices started crashing, and ended up bankrupt. The company had to apply for legal protection from the banks while it tried to sort the mess out, to stop the banks dragging it off to the liquidators to be sold off piece by piece so they could get their loans back. While protected (the 'Chapter 11 Bankruptcy Protection' people talk about), NTL said to the banks, 'look, chaps, we can't repay you the money we owe because we haven't got it. But this is a potentially very profitable business, so if we give you a whole pile of shares instead of your loans back, you'll get your money, please be patient and give us a chance!'. The banks agreed to this, and the original shareholders saw their own investments become worthless as the banks took over effective ownership of the business.

We now have a situation where a load of banks, who had wanted to lend NTL cash and then coin in the interest, are instead reluctant shareholders. They would rather not be in this position, because the value of those shares can still go down as well as up. So, they will be pushing the Board of NTLI like mad to do anything they can to give them their money back and at the same time preserve the value of the shares they still hold. The banks can't simply sell the shares they own; if they flooded the open market with shares the price would plummet and everyone would lose. The only way for the banks to sell some shares and preserve the value of the shares they still hold is to sell them back to NTL itself. The supply of NTL shares in the market is therefore unaffected - in fact, the total share issue is reduced, so if anything the long-term effect will be to push the share price higher.

Sorry, that was quite a large nutshell....

[ian@huth]

Originally Posted by orangebird

I wasn't sure if they did or not... But can't really think of another explanation?

There can be many reasons why a company buys back its own shares. NTLI being an American company can buy back its own shares which are then described as corporate treasury stock and not cancelled as they are in the UK. These shares can then be resold in the market at a futures date to raise capital without having to resort to rights issues. The NTLI share price is currently on the up and any buying of shares should accelerate that movement. If NTLI buy back say $500million of shares and the share price rises by 10% over a time then they can resell those shares for $550 million thus having more to invest than originally. Companies only buy back when they are expecting a share price hike.

[Pierre]

Originally Posted by ianathuth

Companies only buy back when they are expecting a share price hike.

Do you mean like, just before a merger is announced?????????????????????????

[seaneeboy]

Originally Posted by Pierre

Do you mean like, just before a merger is announced?????????????????????????

Or announcing a hike in subscribers (a la Sky yesterday) or the launch of a new product or just about anything that means good news - I would be careful when attempting to second guess the stock market

[Chrysalis]

in practice this may be good but I dont agree with a 500million outlay when they are sacking people everywhere and announcing repairs wont be done out of hours.

Originally Posted by Chrysalis

in practice this may be good but I dont agree with a 500million outlay when they are sacking people everywhere and announcing repairs wont be done out of hours.

I agree, it's rotten ... just powerful people minding their own backs. And for the record, I don't think it's good.

[Stuart]

Originally Posted by Chris T

I agree, it's rotten ... just powerful people minding their own backs. And for the record, I don't think it's good.

Unfortunately, despite what their advertising may say, banks are not in it to help customers (their own, or other companies), they are just in it to get as much money as possible. BTW, I am not defending the banks, I think they are ruthless money grabbing ba****ds.

Originally Posted by Chrysalis

in practice this may be good but I dont agree with a 500million outlay when they are sacking people everywhere and announcing repairs wont be done out of hours.

The two are unrelated. The money to do this is coming from the 1.2 billion or so that they got for selling "broadcast". This obviously leaves over 700 million that could be used for other stuff if they wanted.

The money involved in the repairs / overtime saga is a mere fraction of a percent of the above amounts and there is no real connection between them (I'm sure the explanation for the cutbacks was given elsewhere - as an accounting type cockup).

[Stuart]

Originally Posted by Paul M

The two are unrelated. The money to do this is coming from the 1.2 billion or so that they got for selling "broadcast". This obviously leaves over 700 million that could be used for other stuff if they wanted.

The money involved in the repairs / overtime saga is a mere fraction of a percent of the above amounts and there is no real connection between them (I'm sure the explanation for the cutbacks was given elsewhere - as an accounting type cockup).

Yep, If Russ d's anonymous source is correct (http://www.cableforum.co.uk/board/sh...1&postcount=50), COBI (COBI manage the contracts for the regional engineers) did not bill NTL the full amount for some early projects (due to not having correct procedures for billing set up in time), and have therefore run out of money. NTL in the meantime have spent the extra money they would have spent with COBI on other projects and will not bail COBI out.