Cable Operators

More Adelphia Complications

4/21/2006 8:00 PM Eastern

A group of Adelphia Communications Corp. bondholders made moves to throw a wrench in the cable company’s efforts to emerge from Chapter 11 bankruptcy and execute a $16.9 billion sale to Time Warner Inc. and Comcast Corp., sending a letter to Adelphia’s board of directors criticizing its latest reorganization plan.

Adelphia’s ACC holding company bondholders said they’re dissatisfied with a plan released earlier this month that Adelphia had hoped would speed up the bankruptcy process. Holders of Adelphia’s Arahova operating-company notes would receive $1.04 for every $1 of debt they are owed, while ACC holding company debtors would receive between 14 cents to 43 cents for every dollar owed.

'NO’ VOTE THREATENED

“We will vote against the so-called settlement plan filed with the bankruptcy court last week,” the letter stated. “Thus, the settlement plan will not be approved by our class and cannot take effect. This outcome should have been obvious to you when you approved the filing of the settlement plan.”

The letter was signed by 11 separate noteholders, including major hedge funds Highfields Capital Management, Tudor Investment Corp. and Fortress Investment Group.

Adelphia is under the gun to settle the four-year-old bankruptcy case because of a provision in its deal with Time Warner and Comcast that sets a deadline of July 31 to seal the transaction.

While Time Warner and Comcast are unlikely to walk away from the deal if they believed progress was being made, the deadline still looms.

To counter the possibility that bondholders would never agree, Adelphia also proposed in the amended reorganization plan that in lieu of a settlement, the bankruptcy court invoke a “hold-back provision” that would allow the company to be sold while the bondholders negotiate how the money will be dispensed separately.

In the April 17 letter, ACC holding company bondholders asserted the amended reorganization plan “panders” to the Arahova noteholders, who are junior to most other debtholders, the holding company noteholders claim.

'HOLD-BACK Plan’ SUPPORT

The ACC holding company bondholders also claim in the letter, though, that they have been open to an earlier hold-back provision, which they say would allow the sale to Time Warner and Comcast to go through.

That earlier hold-back provision would appear to push the Arahova bondholders to the back of the line in terms of getting paid.

The holding company bondholders said they were the only class to accept the hold-back plan disseminated last fall.

“We remain supportive of that plan and believe that your full attention should be devoted to its confirmation,” the letter stated. “Since the settlement plan cannot be confirmed, we urge you not to divert further precious time and resources to it.”

Adelphia officials declined to comment.

A vote on the reorganization plan is scheduled for May 14, although executives familiar with the bankruptcy said that given that the voting date has already changed several times, it could be pushed into early June.

September