Troubled cable company NTL announced a life-saving financial restructuring, under which £7.4 billion of its debt will be converted into equity.

The group, struggling under a debt mountain of £11.9 billion, will also have £357 million of new finance pumped in by bond holders.

NTL said the company would be fully funded and the debt reduction would produce more than £556 million of yearly interest savings.

The group said during the recapitalisation its operations would continue uninterrupted, customer service will be unaffected, suppliers would be paid in the ordinary course and management would remain in place.

As part of the deal, NTL would file for Chapter 11 bankruptcy protection in the US. Its operating subsidiaries would not be included in the filing.

Although the group has most of its operations in Britain, it is quoted on the New York Stock Exchange rather than London.

Barclay Knapp, NTL's founder, president and chief executive, said: "The agreement in principle is a major step towards our goal of ensuring the successful completion of the recapitalisation NTL announced in January.

"We are currently working with all parties in our capital structure, including the company's bank lenders, to finalise these arrangements.

"The US-based Chapter 11 process will allow NTL to reorganise and re-emerge stronger and healthier and without affecting operations."

NTL acquired its huge debts by overspending on acquisitions such as Cable and Wireless Communications in Britain and Cablecom in Switzerland.

Mr Knapp said: "The negotiations have been complex and arduous and we will still need to come to final agreement with commercial banking groups."

The reduction in interest payments and the extra £356 would be more than adequate.

The debt-for-equity swap will mean bond holders take ownership of the company, effectively meaning they will decide management's fate.