Adelphia’s Reorganization Plan Leaves Out Shareholders

Adelphia Communications Corp., the cable company that filed for bankruptcy protection under a cloud of federal fraud allegations against its founder, plans to file a reorganization plan soon that gives nothing to shareholders, company executives said.

The plan, expected to be submitted to Bankruptcy Court before the end of March, is a precursor for the No. 5 U.S. cable operator emerging from Chapter 11 bankruptcy protection by swapping much of its $18 billion in debt for new equity, the executives said in an interview.

William Schleyer, Adelphia chief executive, also said the company, when it comes out of bankruptcy protection, was likely to buy cable systems in the future, contrary to speculation that it planned asset sales as part of its reorganization.

“We will have a very healthy balance sheet when we come out,” Schleyer said, adding that the only assets for sale were stakes in a radio station and cable systems outside the U.S.

Although it is typical for stockholders to see their shares become worthless in a bankruptcy, Adelphia’s Chapter 11 filing is unusual in that an “official” committee of equity holders was appointed after the filing. As such, members might expect to gain some recovery under any reorganization plan.

And Adelphia’s stock, though delisted from Nasdaq, continues to trade on the over-the-counter market, indicating that some shareholders see the stock as having post-bankruptcy value.

Efforts to reach representatives of the equity committee were unsuccessful.

The equity committee was formed after Adelphia filed for bankruptcy but still appeared to be solvent, said Vanessa Wittman, chief financial officer.

Later, a forensic accounting investigation revealed that the company was actually insolvent at the time of filing, meaning there weren’t enough assets to give a recovery to all creditors, much less stockholders.

“We’re not obligated to give any value to equity,” Wittman said. “It’s hard to imagine that you can go through the whole capital structure and provide a recovery to all comers.”

Wittman also said professional fees -- those for lawyers, bankers, accountants and other high-priced talent -- were costing the company $9 million to $18 million a month, highlighting the costs of a bankruptcy filing.

The management committee is considering a company name change, which probably would take effect after the trial of founder John Rigas and several family members ends.

Adelphia, now based in Greenwood Village, Colo., is seeking $8 billion in exit financing and said it had started discussions with Deutsche Bank but that numerous other banks also were competing.