Adelphia files for bankruptcy

PHILADELPHIA (June 25, 2002 11:58 p.m. EDT) - Adelphia Communications filed for Chapter 11 bankruptcy protection Tuesday in the midst of financial troubles that have grown ever deeper and more tangled since the company revealed billions of dollars in off-the-books borrowing by the family of founder John J. Rigas.

The nation's sixth largest cable television company had been scrambling to sell assets or lure investors to ease a cash crunch as the Securities and Exchange Commission and two federal grand juries investigated debts amassed by the Rigas family. At the same time, the company announced that it was investigating the family's use of company cash and assets, including jet airplanes, condominiums and apartments.

Erland E. Kailbourne, chairman and interim chief executive, said the filing would permit the company to hold onto assets and reorganize while continuing to operate and pay employees.

"Entering into these proceedings will enable us to fully evaluate our enterprise without the immediate pressure to sell valuable assets that may well benefit the company in the future," Kailbourne said.

The filing in U.S. Bankruptcy Court in New York came a week after the company missed $96 million in bond interest and preferred stock dividend payments.

The company said it reached an agreement for a $1.5 billion loan, arranged by J.P. Morgan Chase Bank and Citigroup USA Inc. and spread among a large number of banks, that would allow it to continue operating while it reorganizes.

Adelphia's troubles came as similar allegations of off-the-books deals and questionable accounting were under a microscope at other companies.

At WorldCom, the SEC was investigating loans to Chief Executive Officer Bernie Ebbers that were used for purchases of stock. And off-balance-sheet financing practices have been under scrutiny since the December bankruptcy filing of Enron, which used private partnerships to shift debt off its books.

Adelphia reported to the SEC in late May that it appeared the company had guaranteed $3.1 billion in loans to the Rigas family, much of it used to buy now-devalued Adelphia stock. The company said even those figures may change because the Rigases refused to review or provide information for the filings.

The company divulged that the Rigas family for years had almost unfettered access to Adelphia's coffers, using company cash or assets to help it buy and run the Buffalo Sabres hockey team, expand the family's own personal cable company holdings, acquire timberland and invest in a golf course near the company headquarters in Coudersport in rural northern Pennsylvania. Many of the deals were never approved by Adelphia's board, the company said.

Adelphia's stock was delisted June 3 by the Nasdaq Stock Market for failure to file financial reports, and the company fired its accounting firm, Deloitte & Touche, naming PricewaterhouseCoopers to replace it. The company also revealed that both subscriber totals and cash flow figures for the past two years had been overstated.

Leonard Tow, chairman of Citizens Communications and Adelphia's largest minority shareholder, resigned June 10 after two weeks on the board, saying he couldn't work on deals to stabilize Adelphia amid "ongoing serial disclosures of wrongdoing."

Adelphia remained delinquent in filing its annual 10-K financial statement, which had been due April 1. The company said a Deloitte & Touche audit to prepare the statement had been halted and the board's own three-member committee was directing an investigation of issues the audit raised.

Adelphia's first challenge in reorganizing will be to complete the accounting for the debt, subscriber and cash flow numbers and get its delinquent 10-K filed, said Joe Galzerano, high-yield telecommunications analyst for CIBC World Markets. "The first thing is to get their financials in order."

Galzerano predicted Adelphia wouldn't be broken up or shrink greatly in size. "If you remove all that debt they've got plenty of cash flow. There's probably no need to start liquidating everything," he said.

"They will continue to operate probably for 60 to 90 days in much the same fashion that they are operating today," predicted Ivan Kallick, a bankruptcy attorney with the firm of Manatt, Phelps & Phillips in Los Angeles. "At the 60- to 90-day mark we will get a better sense of whether they become a downsized operation that continues on, or sell off their assets and merely become a liquidating trust for their creditors."

Kallick, too, noted, "The core of their business has tremendous cash flow. Subscribers are out there paying $40 to $50 a month for services, and that cash flow and the exclusivity that the franchise agreements bring them in some locations is very valuable."

In May, Rigas and his three sons stepped down from executive positions, and gave up seats on the board. The family also agreed to turn over $1 billion in assets and divert cash flow from family-controlled cable companies to try to help the company make debt payments.

Rigas was operating a small Coudersport movie theater in 1952 when a friend talked him into buying a franchise that delivered broadcast television signals, captured on a large antennae, via cable to rural subscribers. Rigas and his brother, Gus, gradually built the business, naming their company "Adelphia," Greek for "brothers." John Rigas bought out Gus Rigas' interest in 1983.

Adelphia stock, which was at $20.39 before the company first divulged the off-the-books debt in March, was valued at only 14 cents a share in over-the-counter trading Tuesday.

I remember reading a corpo=propaganda article how the company was bringing prosperity to rural Pennsyltucky & won't you come join us & live the good life.

I wonder how it's going down in Coudersport, anybody know?

$3.1 billion in loans to the Rigas family

this guy makes ebbers at worldcom look like a piker, ol' bernie was only into worldcom for a little over 600 mill

that we know about

and most of the dough in both cases went into the rat-hole that their respective securities became, both now under 20 cents

somebody will have to start an award for the recipient of the world's largest margin call, previously held by bunker hunt for his exploits in silver in '80

At the same time, the company announced that it was investigating the family's use of company cash and assets, including jet airplanes, condominiums and apartments.

What! No trips to Silky Sally's House of Horizontal Happiness?

Adelphia sucks. Here in Florida, the service is lousy, the equipment is old and if there's a drizzle it goes out.

Our household finally decided to give them the proverbial bird and shelled out the $$$ for DirecTV. It is the best investment in entertainment we ever made and except for the startup costs, it's actually $2 less per month with twice the channels!

I told Pop about Adelphia. Soon he won't get his daily fix of O'Reilly unless he goes DirecTV like I told him. Adelphia's a joke.

Too bad my old man is just as hard-headed as I am.

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