Adelphia reorganization revision addresses creditor concerns(2)

Wed, 04/12/2006 - 8:48am
Brian Santo, CED
Adelphia Communications has proposed a new reorganization plan, this one containing proposals aimed to quell the squabbling among creditors that has been holding up Adelphia's bankruptcy proceedings. William Schleyer, chairman and CEO of Adelphia, said "given that certain creditor groups have been unable to resolve their differences despite months of negotiations and litigation, we received permission from the Court on April 6 to propose a compromise that would, if accepted, eliminate or reduce the risks of continued litigation and thus help preserve the significant benefits to all creditors of the sale transaction to Time Warner  and Comcast." The revised plan is a "carrot-and-risk" affair, under which creditors can vote to accept Adelphia's proposed settlement solution or opt for a "holdback" plan that essentially postpones the dispute for future resolution. The terms of the settlement were set, and include a 14 percent (or $710 million) decline in Adelphia's advisors' estimate of the current valuation of stock to be received in the transaction, a decline that is less than the overall decline of cable stocks in that period. The $12.7 billion cash component of the transaction is unaffected; therefore, the advisors' estimate of the overall value of the deal is only four percent lower than the prior estimate, according to Adelphia. If creditors reject the settlement, Adelphia said it would vigorously pursue the holdback option, which it explained would have uncertain results for creditors, including the possibility that payouts would be substantially less than those in the suggested settlement, or even non-existent. Adelphia still plans to emerge from Chapter 11 bankruptcy and complete the sale to Comcast and TWC by July 31st.

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