Adelphia pulls the plug

Move means co. not pressured into selling assets

NEW YORK — Adelphia Communications filed for Chapter 11 bankruptcy Tuesday, three months after a flood of financial improprieties and a sinking stock nearly destroyed the 50-year-old cable company.

Coudersport, Pa.-based Adelphia and more than 200 of its subsidiaries filed in U.S. Bankruptcy Court for the Southern District of New York. The company promised not to interrupt cable service to customers and said it would continue to pay local franchise authorities, vendors and employees.

Adelphia had initially planned to sell a number of its cable systems, including its valuable Los Angeles properties, to reduce its ballooning debt. However, the bankruptcy filing means its won’t be pressured into a quick sale of assets at a bargain basement price.

Cash to keep the business running will come in large part from a $1.5 billion debtor-in-possession facility arranged by J.P. Morgan Chase and Citigroup. Securing the financing had delayed Adelphia’s filing as its shares continued to sink.

“The last thing you want to do is file for Chapter 11 with no funding lined up,” said one bankruptcy lawyer. The cash will leave Adelphia running as it restructures its balance sheet.

Interim CEO Errnest Kailbourne said the move came “after many weeks of hard work and careful consideration.”

He said in a statement that “entering into these proceedings will enable us to fully evaluate our enterprise without the immediate pressure to sell valuable assets that may well benefit the company in the future. Moreover, this process will enable us to emerge with a new capital structure, and position us to maintain the fundamental strengths of this company.”

Woes began in March

Adelphia’s woes started in late March when it first disclosed its exposure to several billion dollars worth of off-balance-sheet debt. The figure turned out to be even greater than first reported and was related to a web of insider dealings between the company and the controlling Rigas family — often without the knowledge or approval of the board of directors, which was heavily packed with Rigas family members. The Rigases founded and ran Adelphia until they were ousted last month.

The SEC and two grand juries are investigating the company and dozens of shareholders have filed lawsuits against Adelphia and the Rigases.The probes will continue alongside the Chapter 11 restructuring. It’s not impossible that Adelphia under new management could eventually file its own lawsuit against the Rigas family.