Adelphia Files Plan to Leave Chapter 11

Adelphia Communications Corp., the cable television company whose founders are on trial on fraud allegations, unveiled Wednesday a long-awaited reorganization plan in a major step toward emerging from bankruptcy protection this year.

The plan, submitted to the U.S. Bankruptcy Court of the Southern District of New York, includes $8.8 billion in new “exit” financing from a group of banks, the largest sum ever for a company in bankruptcy proceedings.

The plan, which must be approved by a majority of creditors and the court, lays out a priority of payments in cash and new stock to various creditors of the fifth-largest U.S. cable television provider and values the Greenwood Village, Colo.-based company at about $17 billion.

Although Adelphia’s new management said that it envisioned its future as an independent company, analysts speculated that it would eventually be swallowed up by a larger company as part of a long-running industry consolidation trend.

“There is still a great deal of speculation that Adelphia will be acquired fairly quickly,” said Craig Moffett, senior cable analyst with Bernstein Research. “There is significant demand for attractive systems.”

The Adelphia plan will pay senior creditors, including bank lenders, full recovery in cash and new preferred securities to certain joint venture partners.

But subordinated debt holders and preferred and common stockholders will get only certain proceeds of litigation that the company has undertaken against former auditors Deloitte & Touche, the cable firm’s founding Rigas family and the financial institutions that loaned money to the company before its bankruptcy filing in June 2002.

One shareholder group already is objecting to the plan and has asked the court for permission to file its own reorganization plan that would sell off Adelphia in parts.

The company’s plan filing comes as the trials of members of Adelphia’s founding family unfolds this week in federal court in Manhattan.

Founder John Rigas, his sons Timothy and Michael, and former director of internal reporting Michael Mulcahey are accused of stealing millions of dollars from the company by taking out co-borrowing loans for personal business and to cover margin calls on Adelphia stock. They deny the charges.

Adelphia said the $8.8-billion exit financing was led by J.P. Morgan Chase & Co., Citigroup Inc., Credit Suisse First Boston Corp. and Deutsche Bank. It said the loan would give it operating cash and the means to continue upgrading its systems.