Moody's Investors Service has downgraded beleaguered Adelphia Communications Corp.'s credit ratings for the third time in less than three months. The ratings firm says a bankruptcy filing is "potentially imminent."
Adelphia's unsecured debt — roughly $4.9 billion — has been cut from Caa1 to Caa2, while its convertible and exchangeable preferred stock — roughly $1.6 billion — has been cut from Ca to C. This latest action was taken by Moody's because Adelphia is in default on its bank credit agreements and is operating under a "tenuous liquidity position," Moody's said. The firm anticipates Adelphia's credit losses will be higher than previously expected, and is predicting that a bankruptcy filing is "much more certain."
With the uncertainty of the potential claims against the nation's sixth largest MSO swirling and the lack of audited financial statements, Moody's credit rating outlook is negative. "Asset sales agreements outside of bankruptcy court protection are increasingly unlikely as prospective buyers will need to know exactly what they are buying and the contingent obligations will not come with the assets purchased," Moody's said in a statement.
Adelphia is not commenting on the downgrade.
On Monday, Adelphia's stock was delisted from the Nasdaq National Market. At that time, the buzz was Adelphia will most likely file for bankruptcy protection because the delisting enables bondholders to force Adelphia to buy back $1.4 billion in convertible debt — Adelphia does not have that kind of cash on hand.