Adelphia Reorg Still at Loose Ends

Federal judge stays bankruptcy court's approval; bondholders showed a ''substantial possibility that there was never a settlement agreed to by all ...
Stephen TaubJanuary 24, 2007

Final approval of Adelphia Communications Corp’s $15 billion reorganization has been held up yet again.

A group of bondholders challenged the reorganization plan, which was approved in bankruptcy court on January 3, before a federal appeals court. U.S. District Judge Shira Scheindlin ruled that the approval should be stayed since bondholders had shown a “substantial possibility that there was never a settlement agreed to by all authorized litigants,” according to the Associated Press.

Scheindlin maintained that the stay would enable bondholders to receive meaningful appellate review of the bankruptcy court’s rulings. Once in motion, she reportedly added, “the plan truly cannot be unraveled.”

On the other hand, she reportedly observed, “a stay of a confirmation order in one of the longest-running and most complex bankruptcies in our history threatens grave harm to thousands of parties who have been waiting for more than four years to obtain sizeable distributions from a group of bankrupt estates.”

Scheindlin consequently required the bondholders to post a $1.3 billion bond, to be forfeited if they lose on appeal, because a delay could cost the bankruptcy estate more than a billion dollars in additional costs or “could even cause the plan to collapse,” she reportedly added.

Adelphia filed for Chapter 11 protection in June 2002 under the weight of some $18.6 billion in debt. At the time, it was the fifth-largest bankruptcy filing in U.S. history. Two years later, Adelphia founder John Rigas was sentenced to 15 years in prison; his son Timothy, the former CFO, was sentenced to 20 years.

The bankruptcy case was filed in June 2002 after Adelphia disclosed it had $18.6 billion in total debt.

Adelphia’s operations were sold to Time Warner Cable and Comcast in a deal approved on July 31. Once the reorganization plan is finally confirmed, the remainder of the Adelphia estate, estimated at $15 billion, would be distributed to bank lenders, creditors, and bondholders, according to the AP.

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