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Wednesday, 26 June, 2002, 16:55 GMT 17:55 UK
US cable giant goes bust
John Rigas
Mr Rigas cut his teeth in the cinema business
Cable TV operator Adelphia, one of a string of US firms under investigation for accounting irregularities, has filed for bankruptcy protection.

The filing follows mysterious multibillion-dollar deals by the company's founding Rigas family, which have led to two grand-jury probes and an investigation by the Securities and Exchange Commission.

The company said that bankruptcy would allow it to put its house in order, without the immediate pressure to meet looming debt repayments.

Adelphia, the sixth-largest US cable company, said it had arranged a $1.5bn (1m) emergency loan from a banking syndicate to help it keep afloat pending reorganisation.

Adelphia has already defaulted on some $7bn of debt.

Family fiddles

The bankruptcy filing was expected after Adelphia failed to raise enough cash from private investors.

Lenders and shareholders have been deterred by a string of allegations against the firm.

Adelphia's problems began in March when it admitted having guaranteed $2.3bn dollars in loans to the Rigas family, which then controlled the company.

Adelphia was founded in 1972 by John Rigas, who had transformed his cinema company to take advantage of the fledgling cable TV business.

Since March, a series of questionable transactions between the family and the company have emerged.

As a result, all Rigas family members resigned from management positions and the Adelphia board of directors in May.

Problems, problems

Over the past month, the company's new management have uncovered a further web of dubious dealing that included rent-free New York flats, trading in timber, and a widespread overstatement of revenue and subscriber figures.

The company's shares were dropped from the Nasdaq index the beginning of June.

In addition to the broad investigations, the company faces a legal challenge in Los Angeles, where the city attorney has threatened to remove its licence if it does not continue to upgrade its systems.

Unless Adelphia is able to secure the bulk of the promised bank financing soon, it will not be able to meet its promised service levels, and may be shut down by regulators.

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