NEW YORK — Creditors of Adelphia Communications last week backed the bankrupt cabler’s plan to hire two former AT&T Broadband execs and pay them up to $41 million.
Move exacerbated a deep rift between the creditors committee and Adelphia shareholders, whose investments were wiped out when the company filed for Chapter 11 last year. The two groups commonly spar in bankruptcies as each tries to emerge with something in hand.
Shareholders are typically the last in line as a company doles out cash or new securities in a bankruptcy restructuring.
Adelphia recently hired the execs William Schleyer and Ronald Cooper as, respectively, CEO and chief operating officer, to nurse the damaged cabler back to financial and strategic health. Deal guarantees the pair $23.9 million plus incentives over three years that could total $41 million.
HBO, Viacom owed
Creditors, which include HBO and Viacom, accused the investor committee in court papers of “shamelessly hoping to ride the wave of corporate responsibility to further its own parochial interests.” Company insisted the package was appropriate. It must be approved by bankruptcy Judge Robert Gerber, who will hear arguments Monday.
Knocking battered Adelphia, the nation’s fifth largest cable company, back into shape and restoring its credibility won’t be an easy task.
Ironically, Adelphia founder and former chairman John Rigas filed documents opposing the pay deal. Rigas and his family have been accused of multiple counts of fraud and of using the company as a personal multibillion-dollar piggy bank. The shady accounting came to light last spring, plunging the company into chaos. It filed for Chapter 11 last June.
Rigas family trial
Rigas and two of his sons as well as several other Adelphia execs were arrested last year. Several execs have cut deals with prosecutors and agreed to testify. The Rigas’ trial is set for early next year as both sides pour over volumes of paperwork and financial reports.
Meanwhile, the company’s been run by interim chairman and CEO Erland Kailbourne, who also heads the company’s board.
Stockholders have been agitating for Kailbourne to hold a regular annual shareholders meeting where they can vote on various Adelphia matters.
John Rigas also opposed the company’s plans to move headquarters from Coudersport, Pa., to Denver, where Schleyer and Cooper are based.