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Friday, 31 May, 2002, 17:26 GMT 18:26 UK
Nasdaq dumps cable company
Adelphia logo
In their first day of trading in a week, shares tumbled
US cable company Adelphia Communications will be thrown off the Nasdaq stock market next week, in a move which could well trigger a complete financial collapse.

The company, the sixth biggest cable operator in the US, has been in trouble for some time, with regulators voicing concerns about loans guaranteed by the company to its founders, the Rigas family.

The family has tried to head off some of the worries by giving up four seats of the seven on the board of directors and transferring $1bn in assets to help cover the loans.

But it still has not filed its accounts for last year with the Securities and Exchange Commission, having already suspended an audit by Deloitte & Touche.

That puts it in breach of the Nasdaq's rules.

It also gives some of its creditors the right to force the company to buy back loans worth about $1.4bn, triggering bankruptcy..

Fire sale

The company is trying currently to sell off chunks of itself in order to meet its obligations.

Future offices of Adelphia Communications in Coudersport, Pennsylvania
Adelphia's future offices remain vacant
Adelphia has till 15 June to reach a deal with the creditors, whose total loans to the firm amount to $7bn.

But even that process is complicated by the fact that at least one of the new directors - Leonard Tow, who owns about 12% of Adelphia - is against the selloff.

"Such a sale would strip the company of its ability to conduct an orderly and profitable disposition of the remainder of its cable assets when and if it is necessary," he said in a letter to the board.

The company's chief executive, Erland Kailbourne, challenged him to find an alternative.

Replying to Tow's letter, he asked for a specific alternative.

"General ideas without concrete details as to how they will be implemented are of little use at this time," he said.

A family affair

The company's woes stem largely from off-balance-sheet loans to companies controlled by the Rigas family, a phrase now equivalent to the kiss of death for companies in the wake of Enron.

Its status as the fifth biggest issuer of junk bonds in the US also makes it a dicey proposition, and its precarious situation means Standard & Poor's has now given its debt its lowest possible "D" rating.

Adelphia and members of the Rigas family are at the centre of an investigation by the SEC, the stock-market regulator.

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.

See also:

23 May 02 | Business
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02 May 02 | Business
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