Adelphia files plan to exit bankruptcy
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Adelphia Communications Corp., whose founder is standing trial on fraud charges, filed a reorganization plan and received commitments for $8.8 billion in financing to help it exit from bankruptcy protection this year. Adelphia will use about $8 billion to pay creditors, including fully repaying all secured claims. The rest of the loan will be used once the company emerges from bankruptcy, according to the plan filed with the U.S. Bankruptcy Court in New York. Unsecured creditors will receive common stock in the reorganized company. Founder John Rigas and two of his sons will receive nothing under the restructuring plan. The Rigases and a fourth executive, Michael Mulcahey, are accused by federal authorities of looting Adelphia and driving it into bankruptcy. All the executives have pleaded not guilty. Jury selection in their trial began Monday. “This is one of the most complex bankruptcies in U.S. history,” Adelphia chief executive William Schleyer said on a conference call. “This just scratches the surface of what are very complex issues.” The $8.8 billion loan, if approved by the court, would be the largest ever in a bankruptcy case. Adelphia still must gain the approval of creditors for the plan, as well as produce audited financial statements for 2001 and 2002, Schleyer said. The company filed for bankruptcy protection June 25, 2002, citing more than $18 billion in debt. Adelphia’s reorganization value will be between $16.1 billion and $17.9 billion, based on projections in the plan. Company executives said they still are trying to determine how much each class of creditors will receive under the plan. Roughly 17,000 claims seeking more than $3 trillion have been filed against Adelphia in the bankruptcy case, said Richard Toder, a lawyer representing an Adelphia subsidiary. The Rigases are accused of stealing from the company and hiding $2.3 billion in debt, both of which contributed to the company’s decision to declare bankruptcy. John Rigas said yesterday during a break in jury selection in his trial that he objects to the reorganization plan. “We feel there’s real value for present shareholders,” he said. “There was real value when they went into bankruptcy.” Lawyers for the Rigases said the family has a claim against Adelphia that could amount to as much as $4 billion. Last week, the Rigases said in court papers that they want to file their own reorganization plan for Adelphia. A plan “can be easily proposed that would reinstate the bulk of the debtors’ indebtedness, pay all other debts in full and preserve existing equity interests, without dismembering the debtors,” the Rigases said in the papers. A committee representing shareholders also has asked the court for permission to file its own plan. Shareholders will receive no distribution under the plan Adelphia filed yesterday. They would be eligible to receive interest that accrues on funds set aside to pay the company’s litigation expenses. |