Weighed Down By Its Troubles, Adelphia Nears Bankruptcy
|
|
It was inevitable. After more than a month of trying to stave off filing for bankruptcy protection, Adelphia Communications is expected to succumb today to its fate. The seemingly never-ending accusations of improprieties on the part of the Rigas family, Adelphia’s controlling shareholders, proved to be too much for potential saviors. The risks of investing in Adelphia’s future became too high. Now, Adelphia must reorganize under a fractured board while also facing other issues, including the need to sell assets to raise money and the likelihood of lawsuits from disgruntled shareholders and bondholders. Even under bankruptcy protection, Adelphia’s future as the nation’s sixth-largest cable television operator remains unclear. While Adelphia secured $1.5 billion in financing from J. P. Morgan Chase and Citigroup on Friday to allow it to operate while reorganizing, there are strings attached to the arrangement that prevent Adelphia from using all of the money unless certain goals are met, including filing an accurate annual report. Adelphia missed two debt payments in the last two weeks. Adelphia may also be prevented from pursuing a quick sale of its assets by bondholders who are planning to seek to delay any auction until the market for Adelphia’s cable assets stabilizes. Of course, J. P. Morgan Chase and Citigroup want an asset sale as soon as possible. Paul Allen, the co-founder of Microsoft and the largest shareholder in Charter Communications, came closest to saving Adelphia from bankruptcy several weeks ago when he tried to acquire some of its cable systems, but he ended up abandoning his bid because of the price and complexity of a deal. Several other cable companies and private equity firms also passed on Adelphia’s assets because of the high risks. Suitors were most worried about what they were actually getting. Adelphia has said that it has 5.8 million subscribers, but executives close to the company said that number might have been overstated by as much as 200,000. Adelphia may also have inflated its estimated $1.55 billion in 2001 cash flow by tens of millions of dollars, the executives said. Adelphia dismissed its auditor, Deloitte & Touche, earlier this month and replaced it with PricewaterhouseCoopers. Adelphia had been negotiating to sell cable systems with about 450,000 subscribers in Los Angeles and 550,000 subscribers in areas including Georgia, South Carolina and North Carolina. Indeed, another concern of potential buyers had been that a judge could overturn any deal if Adelphia filed for bankruptcy protection and that filing seemed more probable likely by the day. Leonard Tow, the largest shareholder of Adelphia Communications outside the Rigas family and a new director, has also publicly pressed the company not to sell any assets in what he described as an ”atmosphere of desperation.” His statements helped stop a possible deal with Mr. Allen and created friction on the board and with management. Erland E. Kailbourne, Adelphia’s interim chief executive, criticized Mr. Tow for making his statements public. Mr. Tow had also been pressing to be named chairman of the company and is now pushing for Mr. Kailbourne to be ousted, according to people briefed on the situation. As part of Adelphia’s reorganization, the company’s directors are considering new management. Some Wall Street executives suggested that the suitors might have been reluctant to assist in buying Adelphia, hoping they could buy the assets at a greater discount if the company filed for bankruptcy protection. |