Equity Holders Urge Sale Of Adelphia Cable Assets

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With a Feb. 17 deadline fast approaching for Adelphia Communications Corp. to file its Chapter 11 reorganization plan, a group of equity holders is urging an outright sale of the MSO.

In a filing with the U.S. Bankruptcy Court for the Southern District of New York on Feb. 5, Adelphia's Official Committee of Equity Security Holders asked the court to terminate the Denver-based MSO's exclusive period to file a reorganization plan.

That would set the stage for other parties — including the equity committee — to file competing reorganization plans.

The Equity Committee said its plan would consist of an "auction and sale of the operating assets in an open, fair and competitive process in order to maximize recoveries for all of Adelphia's constituencies."

It also said such a sale would bring in billions of dollars above Adelphia's debt. Adelphia is currently carrying $18.7 billion in debt, a figure expected to rise to $20.6 billion by Sept. 30, according to the committee filing.

Citing data from independent appraisers, the committee estimated Adelphia systems could fetch between $22.6 billion to $23.7 billion, leaving $2 billion to $3 billion to be distributed to existing shareholders.

Possible buyers include cable giants Time Warner Inc., Cox Communications Inc. and Comcast Corp. as well as private financial groups, the filing stated.

The committee also claimed Adelphia's new top management — chairman and CEO William Schleyer and president and COO Ron Cooper — aren't motivated to sell the company prior to coming out of bankruptcy, because a large part of their compensation packages are tied to the issuance of new shares after Adelphia emerges.

According to the filing, of the combined $49.6 million in cash and stock the two executives are entitled to receive over the three-year life of their compensation agreements, $34 million "is structured in such a way as to serve as an incentive to prevent Adelphia from selling its operating assets in bankruptcy, even if that is the better course of action for all of Adelphia's stakeholders."

The committee had vehemently opposed Schleyer and Cooper's compensation package, which was approved by the bankruptcy court in March.

Adelphia has until Feb. 17 to file its reorganization plan. Although extensions have been granted before, several observers say they expect a reorganization plan to be filed this month.

Late last month Adelphia asked the court for permission to negotiate with Deutsche Bank Securities Inc. concerning an $8 billion loan to help it emerge from bankruptcy. As part of that filing, Adelphia said it envisions its reorganization plan would leave nothing to existing shareholders.

The biggest equity holder is Citizens Communications Co. chairman Leonard Tow.

A hearing on the motion is set for March 2 — two weeks after the deadline for Adelphia to file its exclusive reorganization plan.

Adelphia said it would oppose the equity committee's motion as not in the best interests of shareholders.

The MSO said it plans to file its reorganization plan with the court before the end of the first quarter. It said its constituents would best be served by a "successful emergence from bankruptcy and continued operation as an independent entity."

Adelphia has said it expects to emerge from bankruptcy protection in the second half of the year.