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EDITIONS
Thursday, 23 May, 2002, 19:20 GMT 20:20 UK
Family cedes control at Adelphia
Adelphia logo
In their first day of trading in a week, shares tumbled

Members of the Rigas family have relinquished control of Adelphia Communications in a bid to revive its flagging fortunes.


The resolution may or may not still include bankruptcy - it depends [on] what the creditors want to do

Jordan Rohan, analyst
In doing so, they have agreed to give up four seats on the firm's seven-member board of directors.

The Rigas family also agreed to transfer $1bn (687m) in assets to the US's sixth-largest cable company to cover certain off-balance-sheet loans.

Coinciding with the move, shares of the embattled Pennsylvania-based firm began trading again on the Nasdaq Stock Market for the first time in a week.

Despite the Rigas's move, shares of Adelphia on Thursday sunk to a new 52-week low of $1.55 a share, having previously fallen 82% from March levels.

Seeking resolution

Nasdaq halted trading in Adelphia shares on 14 May as it awaited more information about the company's financial situation.

Adelphia has yet to file its annual report with the Securities and Exchange Commission (SEC) and still risks being delisted from the Nasdaq exchange.

The Rigas family's move has given the beleaguered company some breathing time to get is financial house in order.

As part of that strategy, Adelphia is looking to unload about half of its cable business in a bid to raise much-needed cash to pay off its debts.

"It seems to me this process is taking shape," said analyst Jordan Rohan of investment-banker Soundview Technology Group.

"The resolution may or may not still include bankruptcy - it depends [on] what the creditors want to do."

Under investigation

Adelphia and members of the Rigas family are at the centre of an investigation by the SEC, the stock-market regulator, over company-guaranteed loans to partnerships controlled by the family.

Future offices of Adelphia Communications in Coudersport, Pennsylvania
Adelphia's future offices remain vacant

Last week, founder John Rigas, who served as chief executive, and his son, Timothy, the firm's chief financial officer, resigned their posts.

The family had maintained its control of Adelphia since the company's inception in 1952.

While family members initially bristled when asked to leave the board, Adelphia's dire financial situation, which may soon cause it to file for bankruptcy, had left them little room for negotiation.

Adelphia said last Friday it missed a critical $45m debt payment, and was under investigation by two state grand juries as well as federal officials.

Ratings cut

Shares of Adelphia have plummeted 82% since March when the firm said $2.3bn in off-balance sheet loans had been made to partnerships run by the Rigas family.

In addition, auditors have disclosed questionable related party transactions - much like those at Enron.

The suspicious transactions were a red flag to institutional bond investors, many of who have sold their holdings.

Adelphia is the fifth-largest issuer of junk bonds in the US.

Its precarious financial situation has caused rating firms Moody's and Standard & Poor's (S&P) to cut its credit rating several times in recent weeks.

On Monday, S&P lowered its corporate credit rating on Adelphia to "D", its lowest rating.

In addition, on Wednesday, Salomon Smith Barney downgraded its rating on the firm's stock to "sell".

See also:

16 Apr 02 | Business
23 Apr 02 | Business
02 May 02 | Business
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