An amendment to Adelphia Communications Corp.'s original plan of reorganization is in the works whereby all pre-petition bank debt holders will be paid in full plus interest, in cash, on the effective date of the plan, according to an attorney close to the negotiations. This comes as Adelphia announced that it would be pursuing a potential sale of the company alongside its efforts to create a stand-alone plan. Adelphia could potentially realize $3 billion more of value through a sale, increasing the recovery for junior creditors and even equity holders. Bank lenders, who were already slated to receive their claims in full, are hopeful that a sale could expedite the company's exit and the settlement of litigation against the banks.
The company's bank debt had been stronger this week in the hopes of a potential sale alongside Adelphia's efforts to incorporate the modifications into a stand-alone plan. The company's Century term loan "old" ticked up about two points over the course of the week to trade in the 97 1/2-98 1/2 range. An Adelphia spokeswoman was not aware of changes being made to the company's plan of reorganization.
Lenders' major point of contention with Adelphia's original plan was that the cash they were set to receive would be placed into an escrow account until litigation against the banks is settled. Moreover, the plan would not have provided for post-effective date interest (LMW, 3/8). But most significantly, lenders have told Adelphia that the plan would not be approved in its present form because the value of their claims would be impaired if placed into an escrow. This would entitle lenders to a vote, which they are not receiving under the current plan. Since disapproval of the plan could lead to a delay in the company's restructuring, it is expected Adelphia will acquiesce.