High Noon for Adelphia Execs

Cable World, Feb 24, 2003

Byline: MAVIS SCANLON

A showdown between Adelphia Communications lenders and creditors and a group of large shareholders is set to take place today in New York before the judge handling the MSO's bankruptcy case. At issue is whether compensation packages offered to secure the employment of Bill Schleyer as CEO and Ron Cooper as COO are excessive.

Shareholders complain the packages are excessive. They also say Adelphia's board did not put enough effort into its search for top executives. Schleyer and Cooper's contracts, executed Jan. 17, need to be approved by the judge.

If unpersuaded by the shareholders' arguments, Judge Robert Gerber could end the bickering between the two camps and approve the hires as early as today. Through Friday, Schleyer has been paid an estimated $336,000 under a per diem pay agreement.

Late Friday, Adelphia amended the terms of the executives' contracts, pushing back the dates for the vesting of restricted options. The first third will vest in two years, rather than one year, from the contract's effective date. The rest are tied to dates after the company emerges from bankruptcy.

The sooner the judge approves the hirings, the quicker the company can begin charting its course to emerge from bankruptcy, including developing a long-term business plan. The installation of new management will also allow Adelphia to borrow from the $1 billion in debtor-in-possession financing (out of $1.5 billion) it cannot yet access. Earlier this month Adelphia requested a second extension to file a plan of reorganization with the court, saying it cannot begin negotiating a reorganization plan with creditors until its new management team is in place. A hearing on the extension request is scheduled for March 17.

Little progress has been made in the past eight months on the challenges Adelphia faces, said attorneys for Adelphia's largest bank lenders in a late Thursday court filing supporting the appointments. "Adelphia's existing senior management is a stopgap," they wrote. "In contrast, Schleyer and Cooper appear to be well-qualified to fill the role of permanent senior management and to make critical long-term decisions."

Recent filings show an escalation of acrimony between Adelphia's official equity committee, on one side, and its lenders and creditors. Shareholders who lost millions claim the combined $41 million deal for Schleyer and Cooper is too expensive, and that evidence makes clear "the board neither conducted a comprehensive search nor seriously, let alone aggressively, negotiated the contracts," according to court documents.

Attorneys representing Adelphia's unsecured creditors, which include HBO, Viacom, Fidelity and Capital Research and Management, retorted by claiming the board carefully considered the relevant issues, and that the equity committee is simply trying to hold up and control the procedure.

THE NEXT QUESTION:

*Will Judge Gerber grant the equity committee's January request for a long-overdue shareholder meeting?