A cable TV firm involved in a tug of war between a local and US company is seeking an exemption to Bermuda's strict ownership rules, it emerged last night.

The American-based McDonald Group is fighting the Bermuda Telephone Company for control of Bermuda Cablevision (BCL).

Telco claims BCL's structure and the payment of 60 percent of its profits as consultancy fees to the McDonald Group is in breach of Bermuda's 60/40 rule.

However the McDonald Group maintains the Bermuda Government approved the present structure and fee payments in 1987 when the Group invested about $8 million in getting BCL up and running.

Yesterday it emerged that BCL has applied to the Finance Minister for an exemption to the ownership rules -- allowed under a section of the Companies Act.

The Finance Minister can grant the exemption -- which can relate to the directors, share ownership and profit payments -- if he thinks it is in the public interest to do so.

Law firm Appleby Spurling and Kempe is handling the application but declined to comment yesterday.

However a spokesman for the McDonald Group denied the application was an admission that BCL was in breach of Bermuda's ownership rules.

"Our attorneys would not agree it is an admission of guilt. It is an attempt to settle this thing in a way that makes everyone comfortable,'' said the spokesman.

"We are trying to figure out a way of getting the public support that we need from the Bermuda Government so it will stand behind its 1987 agreement.'' The control for BCL has reached the Privy Council, in England, but the McDonald Group wants Government to publicly state it originally approved the TV company's structure ending the legal dispute and Telco's bid for control.

Government insists it cannot become embroiled in the legal process and has accused the McDonald Group of waging a campaign of misinformation in the US about the situation in Bermuda.

"This should be looked upon as an attempt by Bermuda Cablevision to make everyone comfortable with its status,'' added the McDonald spokesman.

"It will be dependent on the willingness of the Bermuda Government to take it in a constructive way.'' COURTS CTS