Tensions Are Rising in Adelphia Court Proceedings

Cable World, Oct 14, 2002

Byline: MAVIS SCANLON

Even as the court handling its Chapter 11 bankruptcy case granted Adelphia Communications a six-month extension to file a reorganization plan, internal strife in the bankruptcy procedure itself is rising.

A committee of Adelphia equity holders, which includes stockholders Leonard Tow, Wallace Weitz & Co., AIG DKR Sound Shore Funds, Blue River LLC and Highbridge Capital Corp., last week received approval to hire the law firm of Brager Wexler Eagel & Morganstern as a "special conflicts counsel." According to court documents, the firm will help the committee to investigate and analyze the "claims, liens and security interests" of Adelphia's secured lenders, or the many banks that lent to the Rigas family through loans that were secured by Adelphia assets. Secured lenders are typically first in line to recover funds.

The equity holders needed the special counsel, according to the documents, because their bankruptcy attorneys, the firm of Sidley Austin Brown & Wood LLP, may have a conflict. Sidley's client list includes Merrill Lynch, AT&T, General Electric, Citibank, Morgan Stanley, Credit Suisse First Boston, Bank One, Lehman and Bank of America, which all have their own claims against Adelphia.

Separately, Adelphia's secured lenders, led by Bank of America, asked the court to reject a motion by the equity holders that sought the right to examine documents relating to the secured loans made to the Rigas family partnerships before the company filed for bankruptcy.

Further, local franchise authorities, already rebuffed by the court, stepped up their fight for representation in the proceedings, with several California and New York municipalities joining a motion made by the county of Port Lucie in Florida.

As part of its monthly report to the court, Adelphia said last week it lost $28.6 million in August on revenue of $272.4 million, compared with a $72.4 million loss on revenue of $269.9 million in July. Operating income fell to $8.4 million from $21.6 million.

THE NEXT QUESTION:

*Is the court's six-month extension enough time for Adelphia to make inroads on its cash flow problem?

*Can Adelphia's Stone Age systems survive the onslaught of satellite?

For a more complete picture of Adelphia's finances, see "Cable TV Investor" at www.kagan.com.