Adelphia noteholders ask court to terminate exclusivity; present terms of required 'holdback plan'

By Caroline Salls

Pittsburgh, Aug. 17 - Several Adelphia Communications Corp. senior noteholders asked the U.S. Bankruptcy Court for the Southern District of New York to terminate the company's exclusive periods to file a plan of reorganization and solicit votes on the plan so they can file a competing "holdback" plan, according to a Thursday court filing.

According to the motion, the company has violated the court's mandate to file a plan of reorganization that includes a proposed settlement of inter-creditor disputes.

Under the court's order, the noteholders said, if an amended plan is submitted, creditors must be allowed to vote to accept or reject both the settlement plan and a reserve or holdback plan.

The noteholders said Adelphia has submitted a plan that mandates a global settlement negotiated by some constituencies and does not include a holdback plan alternative, contrary to the plan procedures order.

The noteholders also said that the company signed an agreement that prohibits them from filing a holdback plan and that "to ensure that no one else can pursue the reserve plan," the company has retained exclusive plan-filing privileges.

The noteholders said their plan term sheet allows creditors to receive their plan distributions regardless of whether inter-creditor disputes are litigated now or later or consensually resolved.

The noteholders said under Adelphia's plan terms, litigation over a purported settlement of the inter-creditor issues would delay plan distributions.

Holdback plan terms

Under the terms of the noteholders' proposed plan:

• Administrative, priority and priority tax claims will be paid in full;

• A "victim fund" will be established for government claimants. The fund will include $200 million in cash contributed by Adelphia, either $400 million in cash or stock, at the option of the noteholders' committee, and a first-priority interest in a contingent value vehicle, which entitles the holder to receive 50% of initial net recoveries of up to $115 million;

• Holders of bank claims will receive payment in full in cash, subject to disgorgement upon the entry of a final bankruptcy court order for the return of some or all of the distribution plus interest.

Also, the plan will create a $125 million indemnification fund for the bank lenders, and the balance of any funds currently reserved under the plan will be released to the appropriate debtor.

The fund will be replenished or decreased based on proceeds or dismissal of contingent value vehicle litigation, and will be used for reimbursement of the fund administrator's expenses;

• Holders of Adelphia debtor senior note and subordinated note claims will receive cash and stock, for a 65% recovery, as well as 100% of the contingent value vehicle interests, subject to the interests of the government. These claimants will also receive 85% of any additional cash distributions from fund reserves;

• Holders of Adelphia unsecured claims will receive cash and stock, for a 46% recovery, as well as their share of any additional reserve fund cash distributions;

• Holders of FrontierVision Holdco claims will receive cash and stock, for an 82% recovery, as well as their share of additional reserve fund cash distributions;

• Holders of Arahova debtor note claims will receive cash and stock, for a 51% recovery, as well as their share of additional reserve fund cash distributions;

• Holders of FrontierVision note claims will receive cash and stock, for a 145% recovery;

• Holders of Olympus debtor note claims will receive cash and stock, for a 134% recovery;

• Holders of FPL debtor note claims will receive cash and stock, for a 116% recovery;

• Holders of subsidiary trade claims and other subsidiary claims will receive cash and stock, for a 122% recovery; and

• Holders of existing securities laws claims and junior creditors and equity interests will receive no distribution under the noteholders' plan.

A hearing on terminating the company's exclusivity period is scheduled for Sept. 12.

The noteholders are Aurelius Capital Management, LP; Catalyst Investment Management Co., LLC; Drawbridge Global Macro Advisors LLC; Drawbridge Special Opportunities Advisors, LLC; Elliott Associates, LP; Farallon Capital Management LLC; Noonday Asset Management LP; and Perry Capital LLC.

Adelphia, a Greenwood Village, Colo.-based cable operator, filed for bankruptcy on June 25, 2002. Its Chapter 11 case number is 02-41729.

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