Adelphia unplugged?

Feuding could pull plug on cable pact

Infighting among creditors of distressed Adelphia Communications could scuttle the bankrupt cabler’s sale to Time Warner — a possibility that has some on Wall Street applauding.

“I’d love to see them walk away,” said analyst Richard Greenfield of Pali Research, or “at least renegotiate the price downward.”

“The value of Adelphia decreases every day,” added Christopher Marangi of Gabelli & Co. As it awaits the deal, for instance, Adelphia hasn’t rolled out its own phone service as its rivals have.

“We’re hopeful we can close the deal on time,” TW spokesman Ed Adler said Wednesday.

The $16.9 billion purchase, which would be TW’s biggest move since its merger with AOL, has been pending for more than a year and has a July 31 deadline. Time Warner and partner Comcast could bail then.

But the duo badly need the pact in order to unravel Comcast’s stake in Time Warner Cable and take the unit public.

The FCC, as a condition to approving Comcast’s 2002 buy of AT&T’s cable biz, forced Comcast to put its 21% stake of TWC into a trust and sell it. Comcast inherited the TWC stake from AT&T.

Confused? Add in one of the most complex bankruptcies in U.S. corporate history and the Adelphia deal has become pretty messy.

Plus, it hasn’t received an FCC greenlight. TW chairman-CEO Richard Parsons is waiting another month to submit the transaction for approval in the hopes that the fifth commissioner, Republican Robert McDowell, will be confirmed by then.

“TW would want three Republicans and two Democrats if it can get them. It could get approved with two and two, but there could be more conditions,” said one investor.

Sen. Mary Landrieu (D-La.) is blocking McDowell’s confirmation until the White House commits more money to rebuild Louisiana levees destroyed by Hurricane Katrina.

If the deal doesn’t go through, some Wall Streeters see Time Warner ponying up big bucks to buy Cablevision. TW has long coveted Chuck Dolan’s systems outside New York City, which are contiguous with TW’s Gotham operations. Combining them would create a powerful cable footprint.”They want money, and Jimmy (Dolan) wants to run the Knicks,” one analyst said.

Seeds of doubt about the deal closing have been planted by warring factions of bondholders in Adelphia’s miserable four-year-long bankruptcy proceedings.

Who gets what in a Chapter 11 restructuring is a zero-sum game.

Senior debt holders get paid back in full. Plain shareholders basically get zippo: In this case, they’ll split damages (if any) in pending lawsuits against the Rigases — the family that founded Adelphia, then brought it down through self-dealing and fraud.

But there’s a whole middle group of bondholders jockeying for position over the rest of the dough. The company’s management, which badly wants the TW sale to close, plays mediator. It submitted a revised restructuring plan last week trying to account for various interests.

Creditors will vote on the plan in May or June, but one large contingent, in an angry letter to Adelphia’s board this week, swore to reject it.

“We will continue working to create as much value as possible for Adelphia creditors,” said spokesman Paul Jacobson.

“Now all we can do is try to push the process forward and see where the votes are,” said another person close to the company.

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