Virgin Media announced it is in talks with its senior lenders to agree a three-year delay on repayments of its £4.4 billion in debts.

The company hopes the move, which saw its shares soar as much as 25 per cent, will buy it some breathing space as it seeks permission from its main lenders to defer bank amortization payments until June 2012.

The company said the amendments to its senior facilities agreement would give it more time to seek a complete refinancing of its debt at a later, and hopefully more conducive, date. It added the move is also designed to remove any potential concerns about its ability to meet its amortization obligations.

Virgin Media was due to refinance its debt next year, ahead of £4 million payments in 2009, followed by a hefty £1.1 billion in due in 2010 and a further £966 million due in March 2011. However, given the current turmoil of the credit markets, the company said it had decided to proactively address the issue now and push the payments back to 2012.

Among the other proposed amendments, Virgin Media is seeking to relax its leverage and interest coverage financial covenants.

One analyst described it as “a very pragmatic first step that buys them some time”.

The group said the ten banks which hold the bulk of its debt have unanimously confirmed their support for the proposed amendments.

Deutsche Bank is co-ordinating the process.

Shares in the company, which is listed on Nasdaq, rose as much as 25 per cent to $6.59 on the news, helping repair some of the damage from last week as share prices plunged around the world.

“They had to do something and other options would have been less attractive,” said a sector analyst. “They will have a boat load of debt for 2012 but in the meantime they can look at other options, such as selling assets. That is not an option at the moment as other companies cannot raise the money to buy anything. This way they will be able to get the business to the point where the free cash flow can cope with the repayments.”

Virgin Media, which has a current ratio of net debt to Ebitda of 4.1 times, has one of the highest debt levels of communications companies in Europe. Other companies with large debt burdens include Telecom Italia, Portugal Telecom and Telenet, a Belgian cable company.

Cable companies have traditionally high debt levels, based on predictable free cash flow generative businesses with good assets, allowing them fairly high leverage.

Neil Berkett, the group’s chief executive, said: “Virgin Media has never been in better operational shape and generates significant cashflow. These amendments to our senior facilities, if approved, will enhance our financial flexibility and allow management to focus on continuing to enhance operations and grow cashflow.

“We believe that these amendments are in the best interest of customers, stockholders, lenders, employees and other stakeholders in light of the current status of the credit markets.”

Virgin Media said has already repaid about £900 million of debt with cash and from the proceeds of subordinated debt. The company said it plans to fund its next material amortization payment in the first quarter of 2010 from available cash.

The deadline for lenders to respond to the amendment request is October 31.

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