Creditors Cramp Cable Sale

Bankrupt cable company Adelphia tries to push an asset sale past a gauntlet of feuding creditors. Delays have already devalued the deal by more tha...
Stephen TaubApril 12, 2006

Adelphia Communications Corp., mired in Chapter 11 for more than three years, announced that it has filed a fourth reorganization plan designed to resolve a dispute among its creditors.

Adelphia, the nation’s fifth-largest cable company, added that it is essential that its sale of certain assets to Time Warner and Comcast is completed by July 31. “We continue to expect the transaction to close on schedule and look forward to the cooperation of all interested parties,” said William Schleyer, chairman and CEO of Adelphia, in a statement.

Earlier this year, bankruptcy judge Robert Gerber of the Southern District of New York reportedly stated that to gain leverage in negotiations, one creditor group was “purposefully” imperiling the sale. “If the sale transaction is not consummated,” he added, “there will be severe, negative economic impact on all of the debtors.”

Under the latest reorganization plan, creditors can vote to accept Adelphia’s proposed settlement — which offers a compromise intended to reduce or eliminate the risks of continued creditor litigation — or a holdback plan that would postpone the dispute for future resolution while allowing the rest of the bankruptcy case and the sale to Time Warner and Comcast to conclude in a timely manner.

Adelphia warned that the cash and Time Warner stock immediately available under the revised plan might not be sufficient to fully fund the required holdbacks, and that the bankruptcy court might not approve other property to fund them, such as possible rights to further reserves from the plan, or possible proceeds of litigation on behalf of the company.

If the compromise is not accepted, Adelphia added, it plans to vigorously pursue confirmation of the holdback.

The company stated that the revised plan reflects a decline of 14 percent ($710 million) in its advisors’ estimate of the current valuation of stock to be received in the transaction. This decline, however, is less than the overall decline of cable stocks in that period, it added. The $12.7 billion cash component of the transaction is unaffected. As a result, the overall value of the deal is only 4 percent lower than the prior estimate.

Adelphia’s deal to sell assets to Time Warner and Comcast was valued at $17.6 billion in cash and stock when it was announced a year ago, Reuters pointed out.

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