Troubled cable operator NTL has said it is nearing an exit from bankruptcy protection, but it is also being sued by its banking adviser Morgan Stanley.

Morgan Stanley is seeking �7m ($11.4m) in unpaid fees dating back to 1999.

The two companies have, until now, been regarded as having a good relationship after working together for a number of years.

A spokeswoman for NTL said the firm would consider contesting the claim.

Ongoing woes

The lawsuit is all the more surprising because Morgan Stanley is advising NTL on its exit from Chapter 11 bankruptcy protection.

NTL's parent company, based in New York, filed for temporary protection from creditors under US Chapter 11 bankruptcy laws in May 2002.

Its debts had spiralled after a spending spree during the tech-boom of the late 1990s and the company soon found it was unable to meet repayments.

But NTL said it has now arranged $500m (�312m) of new bonds which will allow it to exit from bankruptcy protection.

Firm friends?

Morgan Stanley advised NTL on its financial restructuring together with Credit Suisse First Boston and is expected to receive fees of up to $20m (�12.4m) for its help.

Mr Knapp says restructuring is almost complete.

The bank had previously advised NTL on its �8.2bn takeover of Cable & Wireless in July 1999, which created Britain's biggest cable company.

But it is now seeking advisory fees dating back to 1999.

NTL said: "Such claims are alleged in respect of advisory fees for financing commitments made in 1999."

But a spokesman for the company said it would contest the claims, believing "it has grounds to do so".

Reborn

NTL's restructuring proposals had included splitting the company into two businesses - NTL UK and Ireland and a European division, NTL Euroco.

There has also been speculation that NTL will team up with rival cable firm Telewest, which is suffering similar financial difficulties and is in talks with its creditors.

NTL reported in November that its profits before tax, interest payments and financial charges had risen to �182m in the July to September period, up from �174m during the previous three months.

The company's stronger bottom line reflected tough cost-cutting measures which had meant the loss of about 8,000 jobs over the past two years.