Adelphia May Keep Area Cable Units
Adelphia Communications Corp. may decide to keep its cable systems in Southern California rather than sell them as previously considered, said Erland Kailbourne, in one of his first interviews since becoming interim chief executive of the company in April.
Though the company had put systems, including those in Los Angeles, up for sale in an effort to reduce debt and avoid bankruptcy, Kailbourne said “everything changes” as a result of Adelphia’s Chapter 11 filing last week. He said the company would not necessarily look to sell cable properties if it doesn’t have to.
Adelphia is Southern California’s largest cable provider, with 1.2 million customers in neighborhoods from Eagle Rock to Pacific Palisades and in Orange County.
Kailbourne said Adelphia finalized $1.5 billion in financing from its lenders Friday to operate and emerge from bankruptcy. He said the company has petitioned the court for money to pay all city franchise fees, programmers and employees. Part of the money will be earmarked for upgrading systems with digital technologies needed for new services such as high-speed Internet access.
“Los Angeles is very important to us, and the [bankruptcy] financing will give us the money to build out our systems to strengthen our position,” he said.
Kailbourne said he would fly to Los Angeles in the next three weeks to meet with Adelphia’s local employees, as well as politicians and city regulators.
Los Angeles regulators have threatened to revoke Adelphia’s five franchises if service deteriorates. The city also has been concerned that bankruptcy would delay payment of franchise fees. Adelphia owed the city a payment of about $1.7 million that was due Sunday.
“I’m reaching out to mayors and regulators in all our markets to tell them that my major mission is to rehabilitate this company and right the wrong that has taken place,” said Kailbourne, who took charge of Adelphia after founder John Rigas and his three sons were forced to relinquish control amid disclosures that private family partnerships had borrowed $3.1 billion backed by the company without shareholder knowledge.
Kailbourne said he expects to recruit one or two board members with cable industry experience within the next month or two, and a new chief operating officer by the time the firm submits a reorganization plan to the Bankruptcy Court, within the next 120 to 150 days.
Four independent board members have been running the company since the Rigases were forced to step down as directors.
Rumors surfaced late last week that Adelphia was talking to cable pioneer Amos Hostetter about an operating role. Hostetter, who is based in Boston, sold his cable company, Continental Cablevision, during an industry consolidation in the mid-1990s that turned him into one of the biggest individual shareholders of AT&T; Corp., the nation’s leading cable provider.
Sources say the timing could work well since the widely respected Hostetter soon could be free of his obligations as an AT&T; board member because of a pending merger of the telecommunications giant’s cable unit with Comcast Corp.
Other names that have surfaced for either board seats or a management role are Gerald Kent, a telecommunications investor who until recently was chief executive of Charter Communications Inc., Paul Allen’s cable company; and Leo Hindery Jr., the former president of AT&T; Broadband who now is chairman of Yankee Entertainment and Sports Network.
“I have had conversations with a couple of those people,” Kailbourne said of the three veteran cable executives. “All of those executives have excellent reputations.”
Industry executives say reducing Adelphia’s debt could be made more difficult by the sharp downturn in cable values in recent weeks. Buyers may not be willing to make acquisitions using their stock in these times. Charter, which came closest to buying Adelphia’s Los Angeles systems, backed away when its shares plummeted, making bankruptcy inevitable. Charter’s shares are down about 75%. In contrast, Adelphia shares have lost 99% of their value since March, when the accounting scandal first surfaced.
“The industry has been under stress,” Kailbourne acknowledged. However, he said Adelphia, which is under investigation for its accounting practices, is in better shape than many in bankruptcy because its assets exceed its liabilities and it generates steady revenue from nearly 6 million cable customers nationwide.
