The ad hoc committee of non-agent secured lenders to Adelphia Communications Corp. is seeking more participants to join its ranks to protect its best interests and increase the negotiating power of the committee in light of the company's recently filed plan of reorganization. "It's time for us to become proactive, less quiet and large enough for us to control our own destiny," said Scott Krase, a portfolio manager from Oak Hill Advisors and current chair of the committee, in a conference call last Wednesday. An Adelphia spokesman did not return calls by press time.
The committee currently represents about 50 non-agent bank members who are primarily lenders to Adelphia's co-borrowing credit facilities with a collective $1.5 billion in co-borrowing bank debt claims. Current members of the committee include funds owned by DE Shaw & Co., Van Kampen Investments, Ares Management, CIGNA Investment, Canyon Capital, DZ Bank, Eaton Vance Management, Owl Creek Asset Management, Deerfield Capital, and Carlyle High Yield Partners. The committee has retained Kirkland & Ellis as its counsel. As first reported last week on LMW's Web site, the law fim is planning to take actions on behalf of the committee in the near future. The committee was originally formed in September 2002 to monitor the bankruptcy case and to ensure that the committee's rights as non-agent lenders were not infringed upon.
The major point of contention for lenders under Adelphia's plan of reorganization is that the cash they are set to receive in fulfillment of their bank claims will be placed into an escrow account until litigation against the banks is settled. Moreover, the plan does not provide for post-effective date interest, James Sprayregen, an attorney with Kirkland & Ellis, noted on the conference call. This means that no interest would be paid while the litigation goes through court, which could be three-to-five years. The current plan does not discriminate between lenders who have claims against the co-borrowing facilities and those who do not. All $6.817 billion entitled to bank debt holders would be put into the escrow. "Everyone is being treated in this [plan of reorganization] exactly the same," explained Krase, noting that the committee is open to non co-borrowers as well.
The plan provides for the cash payout to the lenders through the $8.8 billion exit financing led by J.P. Morgan, Citibank, Credit Suisse First Boston, and Deutsche Bank. Krase encouraged lenders to go back to the institutions that have provided for this exit financing to tell them that "to underwrite a POR that puts our money in escrow is unacceptable." Several sources familiar with Adelphia's plan have said that it is not confirmable in its current form. Still, certain lenders have filed an objection to Adelphia's request to extend its period of exclusivity, claiming that the company put forth a plan that benefits the structurally subordinate and unsecured creditors.
Meanwhile, Adelphia's bank debt levels recovered somewhat last week with its Century Cable term loan "old" trading in the 963/4-973/4 range up from the 951/2 -961/2 level, where the paper had settled two weeks ago. Traders said the paper recovered somewhat as investors saw value at the lower levels. They also speculated that many of the lenders who sold the loans two weeks ago did so in an act of profit taking, as many had likely bought into the credit when it was trading at distressed levels.