Rigases Holding On to Seats

Troubled cable TV operator Adelphia Communications Corp.’s chances of averting bankruptcy appeared to narrow Wednesday when the Rigas family refused to give up their control of Adelphia’s board of directors, according to sources close to the situation.

Banks that have about $5 billion in loans outstanding to Adelphia on Tuesday agreed to extend the company’s credit line if the Rigas family would step down from the board.

Investors said Wednesday that without additional bank borrowing, Adelphia, the nation’s sixth-biggest cable company, would not be able to pay off overdue loans and could be forced to file for Chapter 11 bankruptcy protection within days.

Sources close to Adelphia said the Rigas family, however, could agree on short notice to step away from the company because negotiations are ongoing with the banks and a special committee that has stepped in to run Adelphia.

Adelphia is under investigation by the Securities and Exchange Commission and two state attorneys general for questionable accounting practices involving Rigas family partnerships that borrowed at least $2.3 billion and used publicly held Adelphia as a co-guarantor of the loans.

Last week, Adelphia founder John Rigas and his son Tim Rigas resigned their respective posts as chief executive and chief financial officer of the company. Despite pressure from banks, outside directors and shareholders, the Rigases have remained in control of five of eight Adelphia board seats. The Rigases control 60% of the voting shares of Adelphia.

Adelphia is the largest cable operator in Los Angeles and it has 1.2million customers in Southern California.

At a hearing in Los Angeles on Wednesday, local Adelphia executives assured city regulators that the company was in compliance with its cable franchise agreements and continues to service its customers and to pay its 3,000 employees.

The executives, however, acknowledged that Adelphia had temporarily halted upgrading its cable networks to offer services such as high-speed Internet access to more of its customers.

Analysts said Adelphia, which lags behind other cable operators in digital equipment, is curtailing the upgrades to conserve cash.

Adelphia last week named Erland Kailborne, one of three outside directors, to succeed John Rigas as chief executive. Kailborne is leading an investigation into the company’s financial practices and negotiations with the family to step down from the board.

The banks and Adelphia’s special committee have been urging the Rigases to put $2 billion of assets from their private partnerships into the public company to cover various debts. Among the assets held in the private partnerships are cable systems, company stock and convertible bonds.

Sources close to Adelphia said some shareholders are worried that the Rigases may sell valuable company assets at fire sale prices to pay down its more than $15 billion in debts.

Last week, the company suspended an audit being conducted by its auditor Deloitte & Touche to investigate transactions between the family and the company.