New York— Adelphia Communications Corp.’s four-year sojourn through the bankruptcy courts came to an end June 28, after U.S. Bankruptcy Judge Robert Gerber approved a reorganization plan for assets in California, New York and Ohio that will be transferred to Comcast Corp.
The reorganization plan dealt with two Adelphia joint ventures — Century-TCI and Parnassos — in which the Denver-based cable operator will transfer its interests to Comcast. Comcast already owns 25% of the Century-TCI venture (which has 640,000 subscribers in Los Angeles) and 33% of the Parnassos JV, which has 408,000 subscribers in Western New York and Ohio.
Coupled with Gerber’s approval June 27 of a motion to allow the sale of the bulk of Adelphia assets to Time Warner Inc. and Comcast, and Adelphia’s long and winding road through bankruptcy is essentially completed.
“We’re extremely pleased with the court’s rulings of today and yesterday, which represent major milestones on the way toward the expected July 31 close of our sale to Time Warner Cable and Comcast,” Adelphia chairman and CEO William Schleyer said in a statement after the ruling. “With two major court hurdles cleared in 48 hours, we believe we are on track to close the sale on July 31. We remain focused on obtaining expeditious FCC [Federal Communications Commission] approval of our sale.”
While there are still some minor administrative matters to be resolved concerning the bankruptcy, it is essentially over.
The way is paved for Adelphia to complete its $16.9 billion sale to Time Warner and Comcast by the July 31 deadline.
As part of that complicated deal, Time Warner will receive roughly 3.5 million additional subscribers, increasing its base to 14.5 million customers and strengthening its footprint in such major markets as Los Angeles (where it will be the dominant cable company), Dallas and Cleveland. Time Warner will also spin out a portion of its cable division — Time Warner Cable — as a separate, publicly traded company, retaining 84% of the cable unit, while distributing a 16% interest to Adelphia.
Comcast will get about 1.8 million additional customers — boosting its reach to about 23.3 million customers — and, through swaps with Time Warner in addition to the subscribers it receives from Adelphia, will bolster its dominance of markets such as Florida, Minneapolis and New England.
Adelphia filed for Chapter 11 bankruptcy protection in June 2002, in the wake of a massive accounting scandal that resulted in four of its top executives being charged in federal court with fraud and conspiracy.
Two of those executives — former chairman John Rigas and his son, former chief financial officer Timothy Rigas — were convicted and sentenced to 15 years and 20 years in prison respectively. The Rigases are appealing their convictions.
After announcing in April 2005 that it would sell its assets to Time Warner and Comcast for $17.6 billion in cash and stock, Adelphia spent the better part of a year battling with its bondholders, who threatened to derail the sale by not agreeing to a reorganization plan.
In May, frustrated that it still couldn’t reach agreement with bondholders after months of negotiations, Adelphia proposed allowing the sale to go through without the approval of creditors, which Gerber permitted on Tuesday.
After the judge’s Wednesday order, Adelphia attorney Marc Abrams thanked the court for its “absolutely tireless efforts in preventing these cases from entering a zone that could have been potentially disastrous.”
“The ship has been righted,” Abrams continued. “I think we are on a good and profitable path.”
Next on Adelphia’s plate is to muster approval of the deal from the FCC. Chairman Kevin Martin has said the agency would act on the Adelphia acquisition in mid-July.