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By Heather McLean, 17 June 2002 16:45

NEWS Bondholders of Telewest have pitched a plan that will put them in control of the cable firm's debts after voicing concerns about a bid from US media mogul, John Malone. Last week Malone's Liberty Media, which already has a 25 per cent stake in Telewest, offered a debt for equity swap (http://www.silicon.cmo/a53945 ) which would see the company take a further 20 per cent stake and ease some of Telewest's £5.3bn debt burden. However, bondholders said Liberty's offer was unlikely to be in their best interests as Malone would have too much influence over any future debt restructuring plans. Arnab Roychowdhury, equity analyst at Barclays Stock Brokers, said: "Telewest has got far too much debt, a lot of which is in the form of outstanding bonds. It won't be able to service those debts unless it converts some of its bonds into equity, making the bondholders into shareholders, which would dilute the overall value of the shares." Malone is making similar offers to NTL and has already successfully executed the same move on Dutch cable operator UPC. Roychowdhury added: "Telewest's bondholders think if Liberty holds 20 per cent of the bonds as well as a large chunk of its equity, it would start behaving like an equity holder rather than a bondholder and not act in their interests." Shares in Telewest dropped to just over three pence each on the London Stock Exchange this afternoon, down 13 per cent since this morning. Bernt Ostergaard, telecoms analyst at Giga Web, said: "There is a general scare throughout Europe about what Malone's agenda really is. Lowered stock market rates mean a little bit of money can buy a lot of influence. "This move signals a change in the risk profile of bondholders. They are willing to take on more risk and more influence in the business which means Telewest can reduce the debts on its bottom line and have UK shareholders, rather than being sold off to be chopped up by Malone." Telewest CEO Adam Singer is attempting to sell the company's programming business, Flextech, in order to avoid Malone's offer but buyers are thin on the ground.