Adelphia Communications says it has hired 3 advisers

Posted 7:57AM on Friday 5th April 2002 ( 23 years ago )

PHILADELPHIA - Adelphia Communications Corp. has hired three investment banks as financial advisers to explore possible cable asset sales and other ways to reduce debt, the company announced late Thursday. The company, the nation's sixth largest cable television system operator, said it hired Salomon Smith Barney, Bank of America Securities and Credit Suisse First Boston and also engaged Daniels & Associates as a special adviser. "We recognize that this is a challenging time for all of our shareholders, as well as our employees," said Adelphia chairman and chief executive officer John J. Rigas in a statement. "But Adelphia has many valuable assets that generate strong and predictable revenue and cash flow, and nearly 6 million loyal customers. "We believe that the steps we are taking to reduce debt and deleverage our balance sheet through potential cable asset sales will result in a stronger company better-positioned to build shareholder value," he said. Adelphia, the nation's sixth largest cable television system operator, last week revealed $2.3 billion in off-the-books debt, which resulted in Adelphia stock losing more than half its value. The company said it was cooperating fully with an "informal inquiry" by the Securities and Exchange Commission. But the deals have investors worried, an analyst said. "It has rattled confidence in the management there ... especially if you're a bond trader used to worrying about what else is out there," said Kevin Kuzio, a bond analyst with KDP Investment Advisors. With Rigas and his sons - Michael, Timothy and James - owning nearly one-fourth of Adelphia's stock, Kuzio said, "The ownership structure has always been interesting: as to where the money was coming from, its been kind of confusing." Scrutiny of Adelphia intensified when the company announced Monday that its annual 10-K financial report was being delayed to review accounting for the debt, and confirmed on Wednesday that the Securities and Exchange Commission was conducting an inquiry. The family apparently used some of the money to buy Adelphia stocks and bonds, but the management has been close-mouthed about the debt. Company officials didn't respond to repeated calls Thursday and during the past week for comment on the borrowing, the SEC inquiry, or reports that the off-balance-sheet debt actually has grown to $2.7 billion, or $400 million more than the amount disclosed when Adelphia released fourth-quarter results last week. Oren Cohen, a high-yield analyst for Merrill Lynch, said the Rigas family has long failed to satisfactorily explain how they got money to purchase large amounts of Adelphia stock. "I had been frustrated in the lack of disclosure on how the Rigases had been funding their own equity purchases over the last few years," Cohen said. "That is something we had asked questions about, and never got answers to." Analysts said their concerns now center on how much of the off-balance-sheet debt the company would bear liability for if the declining value of the Rigas' stock holdings leave them unable to meet obligations. "Based on extremely imperfect information, I would say Adelphia's liability could be over $1 billion," Cohen said. Kuzio said liability for the off-balance-sheet debt would be added to Adelphia's overall debt of $14 billion. "If you add in $2.3 billion you get over $16 billion. It's a material amount of debt that was not disclosed previously," he said. Cohen said the possibility that Adelphia would be forced into a bankruptcy declaration if lenders uneasy about the level of borrowing called in debts would be "remote." Kuzio also said that "seems a long way from where we are today. This is a company that generates a lot of cash flow, over $1 billion." But Adelphia stock fell an additional $1.05, or nearly 10 percent, to $9.99 a share in Thursday's trading on the Nasdaq Stock Exchange. That was down from $20.39 a share on March 26, prior to the loan disclosures, and the decline has prompting a flurry of shareholder lawsuits alleging that the Rigas family misled the stockholders. The lawsuits allege that the company and the Rigas family are liable for shareholders' losses, attorney Deborah Gross said, because "They didn't disclose the billions of dollars of debt." A lead plaintiff will be chosen after 60 days from among more than a half-dozen firms that have filed such lawsuits this week, said Gross, a Philadelphia attorney who filed one on behalf of the New York firm of Faruqi & Faruqi.

http://accesswdun.com/article/2002/4/196455