Adelphia Communications Corp. bank debt was volatile last week following the company's filing of a proposed plan of reorganization, which included a clause indicating that no distributions will be made to pre-petition lenders until litigation against the lenders is resolved. "The current plan anticipates that only allowed claims are paid out upon emergence and we would have to either settle, reduce or resolve those claims in order for the pre-petition bank lenders to be paid," explained Vanessa Wittman, Adelphia's cfo, during a conference call last week.
Under Adelphia's disclosure statement, bank debt holders are slated to receive cash in the full amount of their claims against the company and are therefore not entitled to a vote. This could potentially become problematic because if bank debt claims are ultimately impaired due to the litigation, lenders should be entitled to vote on the plan, a few loan market players suggested. Indeed, certain lenders 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. The banks also requested the right to file a competing plan.
Dealers and buysiders said the Century Cable "old" term loan was quoted anywhere from the 941/4-971/2 range last Wednesday but came to rest in the 951/2-961/2 context. The Century Cable facility is one of the facilities that has a co-borrowing relationship with the Rigas family. The other co-borrowing facilities are the Olympus bank claims and UCA bank claims. Bank of America, Bank of Montreal, and Wachovia Bank are the administrative agents on these facilities. The March 2002 disclosure that Adelphia was jointly and severally liable for more than $2 billion of borrowings under these co-borrowing facilities was one of the triggers that led Adelphia toward bankruptcy.
Bank debt facilities without co-borrowing arrangements attached were still said to be trading near par in the 981/2-991/2 range. These include the Parnassos bank claims, the Century-TCI bank claims and the FrontierVision bank claims. The company has approximately $6.817 billion in bank debt claims. About $4.576 billion are claims under the co-borrowing facilities.
Among the litigation still plaguing lenders is the Official Committee of Unsecured Creditors' suit against the pre-petition lenders. The complaint alleges that bank debt holders knew of, or recklessly disregarded, the fraud committed by the Rigas family, particularly in regard to the co-borrowing arrangements. The company is working to emerge sometime before the end of 2004. An Adelphia spokesman declined to comment.
J.P. Morgan, Citibank,Credit Suisse First Boston and Deutsche Bank are the leads for the $8.8 billion exit financing, with J.P. Morgan on the left. Wittman declined to disclose the interest rates on what she said is the largest exit financing in history. J.P. Morgan and Citi are also the co-lead arrangers with respect to $1.5 billion in debtor-in-possession financing.