Lenders to Adelphia Communications Corp. received a double bonus last week with news that the company was pursuing a potential sale and modifications to its original plan of reorganization. Under an amended plan, 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 compares to the company's original plan, which would have placed lender's claims into an escrow account--where no post-effective date interest would be paid--until litigation against the banks is settled (LMW, 3/8).
The company's bank debt moved up last 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 971/2-981/2 range, noted market participants.
But most significantly, lenders have asserted that the plan would not be approved without the changes. In its present form 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.
Meanwhile, 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. An Adelphia spokeswoman was not aware of changes being made to the company's plan of reorganization. Marc Abrams, an Adelphia attorney from Willkie Farr & Gallagher, and David Friedman, an attorney from Kasowitz, Benson, Torres & Friedman, representing the official committee of unsecured credtitors, did not return calls by press time. Peter Pantaleo, an attorney representing bank debt holders from Simpson Thacher & Bartlett, declined comment.