NEW YORK — Adelphia Communications, struggling under a mountainous debt load exacerbated by its Nasdaq delisting, will hold a board meeting Saturday to review the proposed sales of some of its cable systems.
On the agenda is the Los Angeles area system with 1.2 million subscribers, which reportedly has caught the eye of tech mogul Paul Allen’s Charter Communications.
The Coudersport, Penn.-based cabler’s woes worsened Thursday as Nasdaq announced Adelphia’s shares would be delisted beginning Monday because of failure to file an audited annual report with the U.S. Securities & Exchange Commission. The delisting means bondholders of about $1.4 billion in Adelphia debt now have the right to force the company to buy back the securities at face value.
The Saturday meeting agenda came to light Thursday in an exchange of letters between newly appointed Adelphia director Leonard Tow, whose family and trusts own 12.8% of the company, and interim CEO Erland Klaibourne.
Tow fired the first salvo in a letter to Klaibourne that was included in an SEC filing. In his letter, Tow said he understood the company was in advanced negotiations to sell “its most valuable cable properties” — presumably the Los Angeles systems — with the goal to “complete such a transaction by Friday evening.”
Tow went on to urge that no asset sales take place until after he is given “the opportunity to restore Adelphia to a firm financial footing.”
Later in the day, Klaibourne responded, “You earlier asked and were specifically told that no transaction would be completed internally or otherwise before the board meeting. I cannot understand what purpose you believe is served by including a knowingly false statement in a letter.”
Klaibourne also said he was surprised Tow was objecting to selling assets to raise needed cash and asked him to come up with some other specific plan if he has a better idea.
Company hasn’t named any potential buyers for its cable systems, which went on the market in early May when the cabler’s board authorized its financial advisers to solicit formal offers for systems in Southern California, Florida and Virginia.
In addition to Charter, the other prime contenders for Adelphia systems are considered to be Cox and Time Warner Cable, both of which have systems in Southern California.
Comcast and AT&T Broadband are considered less likely suitors, since they are tied up with trying to get regulatory approval for their own merger.
Adelphia may have cheated financial death for another few weeks Thursday, getting a waiver from creditors for its apparent default on an estimated $6.5 billion-$7 billion in bank debt, according to analysts who follow the company. Company reps weren’t available to confirm the waiver.
Regardless, industry watchers say it’s only a matter of time before the threat of Chapter 11 looms again.
“There are a lot of issues with a lot of securities,” Bear Stearns fixed-income analyst Stephen Weiss said. “Even with a waiver today, most people think it’s only a matter of a couple of weeks before this thing comes to a head.”
If a waiver was given Thursday, it would be the second such extension granted to Adelphia: The company got a 30-day extension after it failed to report its 2001 results by the April 30 deadline.
It’s unlikely Adelphia will be able to file its year-end financials anytime soon because the company’s accounting firm, Deloitte & Touche, has suspended its audit amid growing concerns over accounting irregularities.
Even if the company sorts out its problems with the banks, it faces another big payment in just two weeks to bondholders — a payment that was put off for a month after coming due May 15. The sale of assets could help alleviate some of that pressure, but it’s not clear whether it will be enough to stave off creditors over the long term.
The cabler has been rocked in recent weeks with a stream of revelations about its founders and major shareholders, the Rigas family, who are said to have received more than $3 billion in loans from Adelphia via separate corporate entities.
Under immense pressure from shareholders, the Rigases last week gave up control of the company and relinquished their presence on the board of directors.
Adelphia stock, which has tumbled from its year-high of $34, ended virtually flat Thursday at $1.16, after gaining more than 5% intra-day.