UnitedGlobalCom Faces NASDAQ Delisting

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UnitedGlobalCom Inc., the Denver-based international cable operator controlled by Liberty Media Corp., said it received a delisting notice from the NASDAQ stock market after its share price dipped below $3 apiece.

UGC said it would appeal the decision, and as a result the delisting has been stayed until a hearing with NASDAQ can be scheduled.

In a statement, UGC said it is not in compliance because the bid price of its common stock had closed at less than $3 per share over 30 consecutive trading days and the stock did not regain compliance with the rule within the 90 calendar days prior to Nov. 12.

According to the statement, UGC said that if it did not receive relief from NASDAQ, it would request a move to the SmallCap Market, which has less stringent requirements. SmallCap stocks need only to maintain a share price of about $1 each to remain on the exchange.

Though there can be no assurance that it would comply with the SmallCap requirements if it should win that distinction, UGC said it currently meets that market's criteria.

Trying to shed debt

UGC — in which Liberty Media owns a 75 percent stake — has been undergoing a massive restructuring over the past few months, aimed at paring down its debt.

As one of the largest cable operators outside of the United States, with 13.1 million subscribers in 21 countries, UGC was supposed to be the cornerstone of Liberty's international cable strategy.

Although those plans have soured — Liberty was rebuffed by regulators when it moved to acquire systems in Germany and the Netherlands — UGC appears to be righting itself.

The company has lost about $1.8 billion in market capitalization since Jan. 16, 2001 (from $2.1 billion to $251 million), when its stock traded as high as $20.31 per share. This year, the stock has fallen about 51 percent, from $4.98 each to $2.44 per share as of Nov. 25.

But UGC has made some significant operational improvements, including a major reduction in one of the biggest concerns of investors: its heavy debt load.

In the third quarter ended Sept. 30, cash flow rose to $85 million, from a loss of $42 million in the same period last year. Revenue was down 1.8 percent in the period to $385 million, mainly because of discontinued operations at its Dutch subsidiary, United Pan-European Communications N.V., and the deconsolidation of its Australian subsidiary Austar United Communications.

Excluding those results, revenue rose 25 percent during the period.

Schneider: Nearly there

Earlier this year, UGC embarked on an ambitious restructuring of more than $10 billion in debt it racked up buying European cable networks during the boom in the communications market. During its third-quarter conference call with analysts, UGC chairman Gene Schneider said the company has basically completed the major parts of its restructuring, and should complete the rest by the end of the first quarter.

Integral to that restructuring was UGC's tender offer for all of its high-yield debt at the beginning of the year.

At its operating subsidiaries — particularly UPC, the largest cable operator in the Netherlands — UGC restructured about $5.2 billion of UPC debt through a debt-for-equity swap. According to that agreement, the UPC debt was exchanged for 98 percent of the equity in the company.

As UPC's largest creditor, UGC will end up with approximately 56 percent equity in the Dutch cabler.

UGC also has committed to invest about $500 million in capital in UPC. Once that deal is completed, UPC's consolidated pro forma debt will be about $3.5 billion.

UGC also has significantly reduced its capital expenditures. In the first nine months of 2002, capex was $235 million, compared to $1 billion for all of 2001 and $1.8 billion for all of 2000. UGC expects capex to be about $400 million for all of 2002.

"If you think back to one year ago, we still had a pretty steep hill to climb," Schneider said on the conference call. "Our balance sheet consisted of nearly $10 billion of debt. We had no clear path at that time to recapitalization.

"Our businesses were doing better, but we still had negative EBITDA (earnings before interest, taxes, depreciation and amortization) almost across the board," he continued. "And we were still working pretty hard to close our long-awaited deal with Liberty.

"We're not quite over that hill today, but the top is certainly well in sight."

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