Oh, Brother! Adelphia's Chapter 11
The country's sixth largest cable company, Adelphia Communications Corp. (Nasdaq: ADLAC), announced Wednesday that it has filed for Chapter 11 bankruptcy protection. The company says it will continue to pay its employees and operate its networks as it works to straighten out its finances (see Adelphia Files Chapter 11).
Adelphia will operate its businesses and upgrade its cable plants, thanks to a debtor-in-possession facility of $1.5 billion that it expects to have approved at the end of this week.
Among the interesting financial footnotes of Adelphia's past: Shareholders were apparently funding the construction of a golf course as well as lending money to company officers to pay off margin debt.
Since April, the Securities and Exchange Commission (SEC) has been looking at the off-the-balance sheet loans Adelphia made to the family of its founder, John J. Rigas, who stepped down from his position as chairman, president, and CEO on May 15. By the end of May, Timothy Rigas, the company's CFO; Michael J. Rigas, its executive VP of operations; James P. Rigas, its executive VP of strategic planning; and James R. Brown [!], its VP of finance had all resigned.
In the company's bankruptcy filing, Adelphia lists assets of $24.4 billion and liabilities of $18.6 billion as of September 30, 2001. Those totals, however, do not include off-the-balance-sheet obligations.
The company's debtors include Motorola Inc. (NYSE: MOT), Scientific-Atlanta Inc. (NYSE: SFA), Arris Group Inc. (Nasdaq: ARRS), ADC Telecommunications Inc. (Nasdaq: ADCT), C-COR.net (Nasdaq: CCBL), Fujitsu Ltd. (KLS: FUJI.KL), and a slew of banks and broadcast networks.
Since the Rigas family gave up control of Adelphia's board of directors, the company has disclosed that its revenues and subscriber figures had been overstated. In early May, the company revealed that some $3.5 billion had been borrowed by the Rigas family and their associates largely without the approval of Adelphia's board or its shareholders.
Adelphia's continued efforts to untangle its finances have yielded several noteworthy disclosures to the SEC in recent months. Some of those include:
Given all it's been through, Adelphia's long expected bankruptcy comes as a relief to its customers and employees. "Entering into these proceedings will enable us to fully evaluate our enterprise without the immediate pressure to sell valuable assets that may well benefit the company in the future," says the company's interim CEO, Erland Kailbourne, in a statement released Wednesday.
Investors, however, continue to distance themselves from the cable operator. Adelphia shares dropped $0.01 (13%) to $0.13 in early afternoon trading on Wednesday.
— Phil Harvey, Senior Editor, Light Reading