Analyst Knew of Adelphia Debt Deal

A Morgan Stanley & Co. equity analyst testified Monday that he was aware in 2001 that Adelphia Communications Corp. had arrangements that allowed the Rigas family to incur debt guaranteed by the company.

The prosecution in the fraud trial against former Adelphia executives has sought to show that the company hid more than $3 billion in debt, mostly incurred by the Rigases.

Richard Bilotti, who covers the cable and media sectors at Morgan Stanley, said in response to questioning by defense attorneys that public filings in 2001 left open the possibility that $2 billion of Adelphia’s borrowing capacity was available to the Rigas family.

Adelphia founder John Rigas, his sons Timothy and Michael, and former Adelphia Vice President Michael Mulcahey are on trial in U.S. District Court in Manhattan. They are charged with conspiracy and fraud in an alleged attempt to loot the company and mislead creditors, investors and the public. They have denied wrongdoing.

Adelphia, based in Greenwood Village, Colo., is the nation’s fifth-largest cable company.

Bilotti said the disclosure in March 2002 that the Rigases had drawn more than $2 billion in debt guaranteed by Adelphia had little effect on his revenue projections for the company. The defense didn’t question Bilotti on the disclosure’s effect on earnings.

Casting doubt on prosecution claims that Adelphia inflated its subscriber count, Bilotti testified that there were various ways to tally subscribers.

“As Adelphia acquired various companies, they might estimate their subscribers in slightly different ways?” asked Andrew Levander, who represents one of the defendants.

“That wouldn’t be surprising,” Bilotti said.

He also testified that language the prosecution has cited from the company’s annual report for 2000 explaining who can be counted as a subscriber was vague.