Copyright 2006 Reed Elsevier Inc.
Daily Variety
All Rights Reserved
May 31, 2006 Wednesday
By Steven Zeitchik
From Lexis Nexis

Millions of Adelphia customers finally may be headed to Time Warner and Comcast -- or not.

In a surprise filing just before the Memorial Day weekend, Adelphia said it would seek court approval for the sale of its assets to Time Warner Cable and Comcast even if a larger Adelphia reorganization plan isn't in place.

That reorg plan has been bogged down by infighting among creditors, who disagree over how money should be divvied up, and Adelphia's motion essentially constitutes an end run around the creditors.

If the U.S. bankruptcy court in New York grants approval, it would pave the way to a sale ahead of a court-ordered deadline of July 31.

Time Warner Cable, Comcast and Adelphia had originally agreed to conduct the sale only after a reorg plan had been hammered out.

The sale would leave creditors to squabble over a fixed amount of money instead of terms of the deal. Reps for creditors could not be reached Tuesday, but the move is likely to irk many of them, who want a say in the sale before the deal goes through.

Adelphia's gambit, then, could set up a showdown between creditors and the country's largest cable operators.

Insiders on Tuesday said the move reflects the urgency in getting a sale done.

If the deadline isn't met, the whole deal could be in jeopardy, though some note that a delay could help drive down the purchase price, which would be bad news for Adelphia but good news for TW and Comcast.

Sale is especially critical to Adelphia, which would net an estimated $17 billion in cash and stock from the two cable giants. Adelphia has about 5 million customers in markets that include L.A. but has been operating under bankruptcy protection since 2002.

In the motion, company said it sought approval to conduct the sale because there was simply no way to make all creditors agree, questioning "whether the debtors would successfully confirm any version of the plan embodying a genuine global settlement before the occurrence of the outside date (a mere 66 days from now)."

Adelphia also expressed general frustration over the infighting, declaring the company "cannot amend the plan in an effort to assuage the concerns of one creditor faction without further alienating another."

Some Wall Street observers continue to dislike the sale in general because they think cable companies should be worried about new businesses, not adding customers, and also fret that integrating Adelphia's millions of customers won't be easy.

"This (filing) probably makes it easier to get the deal done, but we continue to believe the underlying transaction isn't in the best interest of either Time Warner or Comcast," said analyst Rich Greenfield of Pali Research. "Concentrating on scale is not what either of these companies should be doing."

Wall Streeters weren't alone. In a separate development Tuesday, startup cable net the America Channel filed suit in a Minnesota federal court against Time Warner Cable and Comcast on the grounds that the Adelphia acquisition was anticompetitive. The companies said they would fight the suit.