ABIZ Gets $15M In DIP Funds8/25/2002 8:00 PM Eastern
Adelphia Business Solutions Inc. earlier this month closed on $15 million in debtor-in-possession financing, a move that puts it on track to emerge from Chapter 11 bankruptcy protection, the company said.
The line of credit came from Plano, Texas-based Beal Capital Markets.
"This is a significant step forward for the company," Adelphia Business CEO Bob Guth said in a prepared statement. "We have modified our business plan to its profitable core, and with this secured credit facility in place, we believe we have the necessary funding to reach our projected positive free-cash-flow [or earnings after capital expenditures and interest payments are made] milestone later this year."
Adelphia Business, also known as ABIZ, filed for bankruptcy on March 27 — the same day parent Adelphia Communications Corp. announced it had $2.3 billion in off-balance sheet debt.
That revelation ballooned into a larger accounting scandal and accusations of self-dealing by its controlling Rigas family. That led Adelphia Communications to file for bankruptcy on June 25 and U.S. Postal Inspectors to arrest five Adelphia executives — including three Rigas family members — on July 24.
The collapse of its former parent could have been dicey for ABIZ. The competitive local-exchange carrier had originally obtained a $135 million DIP commitment from Adelphia and an affiliate of the Rigas family.
According to that deal, Adelphia was to provide about $67.5 million of financing, with the rest to come from Rigas family entities. But when the parent MSO couldn't come up with the funds, ABIZ was forced to look for other sources of financing.
Although the Beal financing is considerably smaller, ABIZ's needs are small.
Adelphia once had high hopes for ABIZ, a unit it expected to provide telephony services to businesses — and eventually residential customers — across the country. But as the telecom market began to collapse, ABIZ's plans contracted.
The company had initially expected to be in between 175 and 200 markets, but it scaled back those plans in December 2000 to between 75 and 80 locales. By the end of 2001, as losses mounted and capital needs increased, ABIZ had abandoned all of its expansion plans, opting instead to concentrate on its existing 35 company-owned markets in the eastern U.S.
ABIZ also continues to provide service in 17 additional markets it co-manages.
Guth took the reins at ABIZ on June 4, after four Rigas family members — former chairman John Rigas and his sons, vice chairman and secretary Michael Rigas, vice chairman and chief financial officer Timothy Rigas and vice chairman, president and CEO James Rigas — resigned as executives and board members.
ABIZ's current board of directors consists of three members: Guth; Patrick Lynch, a former Texaco Inc. executive; and Edward Mancini, a Chicago businessman and former vice president of media lending at Canadian International Bank of Commerce.
Lynch and Mancini are also nonexecutive co-chairmen of ABIZ. Edward Babcock, formerly ABIZ's vice president of finance, is the chief financial officer.
Guth was formerly vice president of business operations at ABIZ.