Adelphia Offers Creditors $9.7 Billion

Adelphia Communications Corp., which has agreed to sell most of its assets to Time Warner Inc. and Comcast Corp., would pay creditors at least $9.7 billion in cash under a revised plan to exit bankruptcy proceedings.

Creditors also would receive an undisclosed number of Time Warner shares, according to documents filed with the U.S. Bankruptcy Court in New York on Saturday. About two-thirds of Adelphia’s creditors must vote in favor of the plan before it can be considered by the court.

The revised plan is the first filed by Adelphia that reflects its proposed sale to Time Warner and Comcast. It brings Adelphia, the fifth-largest U.S. cable operator, closer to dissolution after the conviction of founder John Rigas on conspiracy and fraud charges. The previous plan, filed Feb. 4, called for Adelphia to exit Chapter 11 with the company intact.

“This amended plan is another milestone in our bankruptcy process,” Adelphia Chief Executive Bill Schleyer said in a statement. “Throughout this process, maximizing value for our bankruptcy constituents has remained our most important goal.”

Adelphia, which signed a purchase agreement with Time Warner and Comcast on April 21, will seek court approval to have creditors vote on the plan by September. That would put it on schedule to get the court’s permission for the exit by the end of the year. The centerpiece of the plan is Greenwood Village, Colo.-based Adelphia’s proposed $17.6-billion asset sale.

Adelphia filed for bankruptcy protection in June 2002 with more than $18 billion in debt. This month, a U.S. judge sentenced Adelphia founder Rigas, 80, to 15 years in prison for looting the company and lying about its finances before the bankruptcy filing. His son Timothy, 49, the company’s former chief financial officer, received 20 years.

Under the revised plan, holders of $544 million of notes issued by Adelphia’s FrontierVision unit would be fully repaid in cash with interest. Holders of Adelphia senior notes, who have filed more than $5.1 billion in claims, would receive an undisclosed amount of Time Warner shares. They would also get an undisclosed distribution from a “holdback reserve,” according to plan documents.

Adelphia would fully repay all secured claims. The Rigas family would receive nothing under the plan, and payments to unsecured creditors haven’t been determined. The company is disputing $61 billion in claims filed with the court, which may be reduced in the final reorganization plan.

On June 6, New York-based buyout firms MidOcean Partners and Crestview Capital Partners agreed to buy Adelphia’s cable systems in Puerto Rico for $520 million. That sale also requires court approval.

Prosecutors said the Rigases lied to investors about Adelphia’s financial condition from 1999 to 2002 as the company borrowed $9 billion to fund an acquisition spree and upgrade cable lines. Much of that money came from syndicated loans taken out jointly by Adelphia and Rigas-owned businesses. Prosecutors said those loans helped fund the Rigases’ purchase of $1.6 billion in company stock and debt.

Adelphia shares plunged after the company disclosed on March 27, 2002, that it had backed $2.3 billion in Rigas borrowings under the loans, including some to buy securities.