Adelphia's settlement with trade creditors criticized by W.R. Huff

New York, April 21 - Adelphia Communications Corp.'s proposed settlement with its trade creditors was criticized as violating the bankruptcy code by W.R. Huff Asset Management Co., LLC.

In a filing Friday with the U.S. Bankruptcy Court for the Southern District of New York, the investment company said the settlement was in fact "no such thing."

"The proposed settlement simply seeks to pay trade creditors substantially more than they are legally entitled to in order to obtain their support for the plan and artificially impairs them in the hope that the debtors can cramdown the plan on the debtors' unsecured creditors," Huff added.

Any settlement must be approved through the Chapter 11 confirmation process, Huff said, and the firm also criticized the agreement as "not reasonable, equitable or in the best interests of the debtors' estates."

On April 17, Adelphia announced that it had reached agreement with an ad hoc operating company trade claims committee under which the committee and some members will support the company's fourth amended plan of reorganization in exchange for the company including specified terms and conditions in the plan.

Under the agreement, the company said it would not amend or modify the plan in any way that adversely affects the treatment of the trade claims held against all debtor groups other than the holding company debtor group without the committee's prior written consent.

Also under the plan support agreement, trade claims within some debtor groups will accrue simple interest at 8% per year, and allowed trade claims within those groups will be paid in full with interest.

Also, Adelphia has agreed to support the payment of fees and expenses for the committee's professionals, which totaled $2.13 million as of March 31.

The company also agreed not to oppose and not to object to any contingent fee claim filed by counsel to the trade committee for a contingent fee payment based upon the improvement in the recoveries of the operating company trade claims on account of post-bankruptcy interest, up to $5 million.

Adelphia, a Greenwood Village, Colo.-based cable operator, filed for bankruptcy on June 25, 2002 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 02-41729.

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