Adelphia Communications' bank debt regained ground last week after Bank of America released an extensive research report on the company touting its Century Cable Group as the "steal of the century." Levels for Century Cable's term loans rallied from the mid 60s, where pieces of the paper traded two weeks ago, into the 70-73 range. The report puts in writing what a lot of people have been saying about Adelphia for some time, said market players.
The report notes that $2.48 billion of Century Cable bank debt, which B of A rates a buy, trades at distressed levels because of its high leverage and its tag as one of the facilities connected to the controversial co-borrowing arrangements held by the Rigas family, who founded Adelphia. "We would highlight that not only do we believe that the high-quality 1.32 million [subscribers] supporting the facility provide more than adequate collateral, but we would also note that Century derives an estimated $150200 million of incremental value from its equity interest in western Connecticut systems," said the report. The collateral is so rich for Adelphia that even after the debt is taken care of there may be some value for equity holders coming out of restructuring, one dealer speculated. The report also emphasizes that the case against Century Cable lenders in regards to the co-borrowing arrangements and the risk of subordination of their claims is weak, noted one buysider.
The market for the Century Cable terms loans has been resting in the low 70s for the last month, but it dropped two weeks ago. One buysider explained that a certain amount of volatility was expected from the company as it absorbs some recent management changes. An Adelphia spokesman noted that the company will soon seek a 120-day extension to its exclusive period to file a plan of reorganization.