Bond Adjustment Could Clear UGC-Liberty Deal


Liberty Media Corp. again adjusted its pending purchase of 76 percent of UnitedGlobalCom Inc., agreeing to increase the price it will pay for UGC bonds by 44 percent.

The two parties have gone back and forth over the acquisition for more than a year. In May 2000, when the deal was first announced, Liberty had planned to acquire a 44 percent interest in UGC in return for about $1.4 billion.

But as UGC's stock price began to plummet last year, the Liberty deal also changed. First, it called for Liberty to increase its stake in UGC to 51 percent ; later, to 76 percent. Also removed from the modified deals were Liberty's stakes in several Latin America cable operations, which will remain with Liberty.

In return for its 76 percent of "new United" — the entity set up for the transaction — Liberty will contribute an $896 million loan, $200 million in cash and the $1.4 billion in UGC bonds.

Liberty also has agreed to a 10-year standstill agreement, whereby its shares would vote with UGC's current management, headed by chairman Gene Schneider, who will remain in that role.

The decision to increase the price for the bonds comes after UGC bondholders balked at the original offer — $250 per $1,000 principal amount at maturity. Last week, Liberty increased that offer to $360 per $1,000 principal amount at maturity.

But sources familiar with the situation said Liberty is likely to increase the price to $380 per $1,000 principal at maturity before the deal closes.

The bond-price adjustment appears to be the last hurdle for the Liberty UGC deal, according to analysts.

"A closing at the end of this month is a given," said Janco Partners Inc. cable analyst Matt Harrigan. "The next thing for [Liberty] was to fix the balance sheet. It's certainly much cleaner to get rid of the old debt at the old United level. That's good news."

In a separate deal, Liberty has scrapped a plan to purchase a 22 percent interest in German operator Kirch Group's Premiere World pay TV network, currently owned by News Corp.

In November, Liberty notified the German Cartel office — that country's main regulatory body —of its intention to buy News Corp.'s 22 percent stake in Premiere World, a consistent money-loser. But published reports from last week said Liberty has abandoned that plan in order to smooth the path for German regulatory approval of its purchase of 3.5 million subscribers from Deutsche Telekom AG for $4.9 billion.