Split Adelphia Creditors Talk Deal Some Noteholders in Group That Has Opposed Accords Are Discussing a Settlement
By PETER GRANT Wall Street Journal July 21, 2006; Page C4 http://online.wsj.com/article/SB115345018215513349.html?mod=technology_main_whats_news Settlement talks among warring creditors of the bankrupt Adelphia Communications Corp. are showing rare signs of progress thanks in part to a schism that has developed within one of the key creditor groups. The outcome of the struggle, which involves some of the biggest hedge funds on Wall Street, will determine how the roughly $17 billion of proceeds from the sale of Adelphia's assets to Time Warner Inc. and Comcast Corp. are divvied up. The creditor group, which owns debt issued by Adelphia with a face value of $4.9 billion, hasn't supported settlement proposals in recent months by the company and U.S. Bankruptcy Judge Cecilia Morris in New York, who was brought in to mediate. But lately at least two members of that group, Highfields Capital Management LP and Tudor Investment Corp., have broken with the rest and are talking to other creditors about a deal, according to people familiar with the talks. Those talks could still break down over a variety of issues. Also, even if a deal is reached, the holdouts may have enough strength to prevent the deal from being approved in bankruptcy court. Bankruptcy Judge Robert Gerber, who is overseeing the case, in June ruled that the sale could close at the end of this month even though no reorganization plan has been approved, leaving creditors to fight over the proceeds. Adelphia sought bankruptcy protection four years ago in the wake of a corporate looting and accounting scandal involving its founding Rigas family. (Once based in Coudersport, Pa., Adelphia is now in Greenwood Village, Colo.) The battle among creditors involves one of the biggest pots of money fought over in any bankruptcy proceeding. It will affect the value of notes with a face value of more than $7 billion, which are actively traded. Besides Highfields and Tudor, players include Appaloosa Management LP, Cerberus Partners, Goldman Sachs Group Inc., W.R. Huff Asset Management, Fortress Investment Group LLC and Perry Capital. The biggest fight is among the Adelphia noteholders -- which include Tudor, Highfields, Fortress, Perry and more than seven other major firms -- and those who bought debt issued by Adelphia subsidiary Arahova Communications Inc., including Appaloosa, Cerberus and Goldman. Their fight, over roughly $1.9 billion, stems in large part from billions of dollars of tangled intercompany claims that Adelphia spent about $100 million in accounting fees to sort out. In April, Adelphia's management proposed a settlement that would have given Arahova creditors $1.04 for every $1 of claims they held and Adelphia noteholders about 43 cents. Arahova supported that plan but it was vilified by the committee representing the bulk of the parent-company creditors. After meeting extensively with both sides, Judge Morris in June proposed a new settlement that would have given an additional $445 million to Adelphia noteholders. Of that, $175 million would come from the Arahova group's share and $175 million would come from the elimination of a special fund set up to pay the legal expenses of Adelphia banks that are facing a lawsuit from creditors that alleges they were complicit in the Rigas family fraud. The Morris plan also was supported by the Arahova group. But that plan has splintered the Adelphia creditor group. Tudor and Highfields are currently meeting with other creditors and the company in an effort to use the Morris plan as a basis for a new settlement that they could support, according to people familiar with the matter. But other Adelphia creditors believe the Morris plan is so deficient that the best strategy is to push for litigation. That group, which includes Perry, Fortress and five other holders, recently hired Martin Bienenstock, a prominent bankruptcy attorney at Weil, Gotshal & Manges LLP. The big questions now are whether a new settlement proposal will emerge and whether Judge Gerber, who is overseeing the case, will put it out for a vote. If it is voted on, it is also unclear whether it would get the necessary notes from the Adelphia creditors. ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 antunes at uh dot edu Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
