Copyright 2002 / Los Angeles Times
Los Angeles Times…04/05/2002
To restore stability in the face of a plunging stock price, Adelphia Communications Corp. plans to sell up to half of its cable systems, worth as much as $8 billion, to pay off some of its debt, according to investment bankers in contact with the company's advisors.
John Rigas, the 77-year-old founder of Adelphia, has agreed to put up for sale operations including his prized Los Angeles systems, which he acquired only two years ago, sources close to the company said.
Investment bankers say the company could sell systems serving 3 million of its nearly 6 million cable subscribers nationwide. The Los Angeles systems, which serve 1.3 million subscribers, could sell for a respectable sum — as much as $5 billion — because they are in the most desirable neighborhoods. However, Rigas could face a big tax bill on any cash sale, reducing the company's proceeds.
Late Thursday night, Adelphia, the nation's sixth-largest cable company, confirmed the hiring of Salomon Smith Barney, Credit Suisse First Boston and Bank of America to help sell cable assets to reduce the company's nearly $15 billion in debt.
Adelphia's shares have plummeted 51percent since Rigas officials disclosed last week that the company had guaranteed $2.3 billion in loans to off-balance-sheet partnerships owned by the family.
Adelphia's shares fell $1.04 on Thursday to close at $10 on Nasdaq.
The Securities and Exchange Commission is investigating whether Adelphia properly disclosed the off-balance-sheet practices. More than 10 class-action shareholder suits have been filed against the Rigas family and Adelphia, which is based in Coudersport, Pa. Shareholders claim the Rigases violated securities laws and misled investors by failing to disclose that the firm guaranteed loans to family-owned partnerships that used the money to buy Adelphia securities.
Meanwhile, a group of dissident Adelphia shareholders is pressuring the family to step down from day-to-day management because of conflicts of interest. Wall Street sources said the group is being led by Gordon Crawford, an influential Los Angeles money manager at Capital Research & Management, which owns 4.7 percent of Adelphia. Crawford has assembled a group that represents more than 50 percent of shareholders, sources say.
Crawford's plan is to bring in a new management team, led by cable pioneer Leonard Tow, to replace Rigas, Adelphia's chairman and chief executive, as well as Rigas' three sons, all of whom are top executives at the company.
But because the Rigas family controls Adelphia's voting shares, any management shake-up may be hard to achieve.
Tow, who along with Rigas helped build today's cable industry, knows Adelphia intimately. Tow became Adelphia's largest independent shareholder, with a 10 percent stake today, after the 1999 sale of his company, Century Communications Corp., whose largest cable operations were in Los Angeles.
Neither Tow nor Crawford would comment.