Copyright 2002 / Los Angeles Times
Los Angeles Times…05/14/2002
Adelphia Communications Corp. 's largest shareholder outside its founding family said Monday he will seek representation on the board, six weeks after the company incurred the wrath of Wall Street with the disclosure of $2.3 billion in off-balance-sheet loans.
Leonard Tow, who, along with his family trusts, owns 12 percent of Adelphia's Class A shares, said he will exercise his right to appoint himself and two other directors to the debt-laden company's board.
Adelphia executives were not immediately available for comment.
Adelphia's stock lost 8 cents to close at $6.06 in Nasdaq trading. Since the deals were disclosed, the shares have lost nearly 70 percent of their value.
Investors have become wary of off-balance-sheet items since the spectacular collapse of energy trading company Enron Corp. - the company's off-balance-sheet deals are believed to have been used to hide debt and enhance earnings.
Tow, chief executive of telecommunications firm Citizens Communications, said in a statement that he has the right to appoint the directors as part of Adelphia's 1999 agreement to buy Tow's Century Communications Corp., which operates cable systems in the Los Angeles area. Adelphia bought the company for $3.6 billion in cash and stock.
Adelphia, the No. 6 U.S. cable company, is the target of a Securities and Exchange Commission probe after the company disclosed it guaranteed $2.3 billion in loans to partnerships controlled by its founders, the Rigas family.
The family has said it used some of the money from the loans to buy an undisclosed amount of Adelphia shares. Such information is expected to be disclosed in its delayed annual report filing.
"Tow's move does very little for Adelphia's fundamentals," said Joseph Galzerano, debt analyst with CIBC World Markets.
"We're still looking for what the company has to say in its annual report. Until then, the slow trickle of news is unlikely to be positive for the company."
In April, Gordon Crawford, portfolio manager at Capital Research & Management and one of the most influential media investors, began rounding up disgruntled shareholders to support Tow's appointment to run Adelphia's day-to-day operations, replacing the Rigas family. The effort was largely symbolic, however, as the Rigas family has voting control of the company.
"To protect my family's substantial investment in Adelphia, as well as the interests of other minority shareholders, I have determined that I must now enforce my family's right to be represented on Adelphia's board of directors," Tow wrote in a letter to Adelphia's board that was released to the media.
In addition to himself, Tow is seeking the appointment of Rudy Graf, president of Citizens Communications, and Scott Scheider to Adelphia's board.
Adelphia said last week that it would sell a number of cable systems representing nearly half of its subscriber base in an effort to pare down its debt, which totaled $14.7 billion, according to its preliminary balance sheet issued in March.