Cable company Adelphia Communications files for Chapter 11 bankruptcy protection
Wednesday, June 26th 2002, 12:00 am
By: News On 6
PHILADELPHIA (AP) _ Adelphia Communications' long-awaited bankruptcy filing was greeted by analysts as a chance for the nation's sixth-largest cable company to stay in operation while trying to unsnarl its finances.
Adelphia and more than 200 subsidiaries filed for Chapter 11 bankruptcy protection Tuesday night in U.S. Bankruptcy Court in New York, a week after the company missed $96 million in bond interest and preferred stock dividend payments.
Joe Galzerano, a bond analyst for CIBC World Markets, said the company still may be able to avoid being drastically downsized or broken up.
``If you remove all that debt they've got plenty of cash flow,'' he said. ``There's probably no need to start liquidating everything.''
Adelphia's finances have been in a downward spiral since it revealed in March it could be liable for billions of dollars in off-the-books borrowing by the family of founder John J. Rigas, with much of the money used to buy now-devalued Adelphia stock. Rigas and his three sons surrendered control in May, stepping down from executive positions and seats on the board.
The filing followed vain attempts to sell assets or lure investors to ease a cash crunch as the Securities and Exchange Commission and two federal grand juries investigated Adelphia debt. At the same time, the company announced that it was investigating the Rigas 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 let Adelphia hold onto assets and reorganize while continuing to serve customers in more than 3,500 communities and pay employees and vendors. The company has more than 5.7 million customers in 32 states.
Bankruptcy attorney Ivan Kallick said the company would be aided by its 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,'' he said.
With debt mounting, the company had faced growing complaints of halted cable installations, unavailable high-speed Internet service and slow telephone help. Communities including Mecklenburg County, surrounding Charlotte, N.C., retained a Washington law firm to protect their franchises. And the Los Angeles city attorney threatened last week to revoke five area franchises, citing customer service problems.
Adelphia's troubles erupted as similar allegations of off-the-books deals and questionable accounting were under a microscope at companies including Enron and WorldCom. Adelphia reported to the SEC in late May that it appeared the company had guaranteed $3.1 billion in loans to the Rigas family.
Adelphia divulged that the Rigases for years had almost unfettered access to company 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 rural northern Pennsylvania. Many of the deals were never approved by Adelphia's board.
Adelphia stock, at $20.39 a share before the company first divulged the off-the-books debt in March, has lost virtually all its value, priced at 14 cents Tuesday.
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 it ``Adelphia,'' Greek for ``brothers.'' John Rigas bought out Gus Rigas' interest in 1983.