Bresnan Liberates Some International Stakes

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Liberty Media Corp. said last Monday that it has sold a portion of its international cable holdings to a new entity controlled by cable pioneer Bill Bresnan.

BCI International Investments LLC has acquired a 21 percent indirect ownership interest in certain subsidiaries that control all or a portion of Liberty's interests in Telewest Communications plc, Chorus Communications plc and UnitedGlobalCom Inc., according to a press release.

As a result of this transaction, Liberty's indirect ownership interests in Telewest, Chorus and UGC will decline from 25 percent to 20 percent, from 50 percent to 39.5 percent, and from 76 percent to 75 percent, respectively.

Financial terms of the deal were not disclosed.

Telewest is the second-largest cable operator in the United Kingdom with 1.3 million subscribers, while Chorus has 206,000 subscribers in the Republic of Ireland. UGC has about 13.1 million customers in 21 countries in Europe, Latin America, and Australia.

BCI International manager of communications Maureen Huff said Bresnan got involved in the deal because of Bill Bresnan's relationship with Liberty chairman John Malone.

"He [Bresnan] has worked with John Malone since 1984," Huff said. "This was a great opportunity for us to get back in partnership with Liberty and John and their team."

Huff said that BCI International won't have an operational say in the partnership, but that the company will "consult with Liberty regarding certain strategic issues." Although BCI sees no immediate additional opportunities in the international market, Huff added, the company expects to grow.

Bresnan agreed, saying: "There's room for growth in these equities right now. I have a great deal of confidence in John [Malone] and Dob [Bennett, Liberty president]."

Liberty had been on an aggressive bent to acquire European cable properties — it had announced deals to buy systems in Germany and the Netherlands — but ran into problems with regulators in those countries. Since then, Liberty has refocused its efforts on its existing properties, mainly UGC and its wholly owned subsidiary, United Pan-European Communications Inc., the largest MSO in the Netherlands.

Stifel, Nicolaus & Co. cable analyst Ted Henderson views the Bresnan deal as largely symbolic — he estimated it was worth between $10 million and $15 million — adding that Liberty likely made the move for tax benefits.

"Liberty has always managed its capital structure to help drive value by raising and lowering its percentage of ownership in it various entities," Henderson said.

TCI ties

Bresnan has had experience with international cable assets through partnerships with Liberty's former parent, Tele-Communications Inc.

TCI International was Bresnan's partner in two international cable operations, in Poland and Chile. Bresnan later swapped his interest in the Chile operation in 1998 for TCI International's holdings in the Poland cable operation. Bresnan in 1999 sold the Polish cable systems — which had 360,000 subscribers — to Elektrim S.A., a Polish telephone and electric utility company, for $325 million.

"Bill Bresnan has been a pioneer in the cable television business in the U.S. and abroad," Bennett said in a statement. "Liberty Media and its predecessor companies have had a number of successful ventures over the years with Bill and his team and we look forward to working with them again. Their hands-on operating experience will be a significant benefit to our international cable activities."

Comcast deal update

Bresnan, who sold his Bresnan Communications cable holdings to Charter Communications Inc. in 2000 for $3.1 billion in stock and debt, recently agreed to purchase 320,000 subscribers in Montana, Wyoming, Utah and Colorado for $735 million from AT&T Broadband (now Comcast Corp.) That deal is expected to close in the first quarter of 2003.

Bresnan would not discuss the Comcast deal, but sources familiar with the situation said it is likely that Comcast will provide some seller financing to complete the transaction.

Bresnan, who plans to pump about $300 million into the systems over the next three years for upgrades, had run into some difficulty in securing part of the financing. He originally hoped to raise the $300 million in the high-yield market, but the collapse of the debt markets over the past several months closed that door.

Sources estimated that Bresnan was about $150 million short of his funding goal.