Adelphia drops another 10-15 points, investors sit back as one analyst recommends the converts

By Ronda Fears

Nashville, Tenn., May 16 - Adelphia Communications convertibles fell sharply again early Thursday but trading fell silent in the afternoon as market buzz focused on the cable company missing an interest payment on its 9.375% notes due 2009 and players waited for news on whether the common stock would be delisted.

Also sidelining investors was a sellside analyst report recommending the converts.

"There was a lot of pain today," said a convertible trader in Connecticut.

"There was not a lot of it (Adelphia paper) trading today, especially this afternoon. People are trying to figure out what they are going to do now."

A market source said Adelphia confirmed that it missed a $23 million payment on its 9.375% notes due 2009 and that two Adelphia units missed payments totaling another $14.8 million.

Also Thursday, Adelphia CFO Timothy J. Rigas resigned a day after his father and founder John Rigas stepped down as CEO amid a scandal centered on dealings between the company and Rigas family partnerships that is the subject of an SEC investigation into the company's accounting practices.

The situation also has caused the delay of Adelphia's 10-K filing, which prompted Nasdaq to consider delisting the stock. A hearing on the matter was set for Thursday, but the outcome was unknown.

That was the focal point for convertible holders, since they could put the converts back to the company if the stock is delisted.

The 3.25% due 2021, which are putable at par on May 1, 2003, lost another 15 points to 34 bid. The 6% converts due 2006 fell another 10 points to 34.5 bid. The 5.5% convertible preferreds fell 21 points to 29.5.

The other convertible preferreds were down similarly, with both 7.5s at 15 bid and the 5.5s down 13.5 to 16 bid.

"There were no offers left standing at the end of the day," said a convertible dealer.

"There are still some people saying that the assets can be sold and even if the company goes into bankruptcy, all the convert holders will get paid, make a full recovery. That stemmed the tide of sellers, but it may just be a finger in the dam if, or when, they file."

Indeed, there was a sellside analyst with a report out that suggested the convertible holders were sitting okay in the situation, aside from whether the company goes into default on its debt, the convertibles become putable due to delisting and/or Adelphia files bankruptcy, chiefly due to the company's assets.

"There's tremendous asset value here and recovery levels should be adequate," if Adelphia files bankruptcy, the analyst said, stressing he could not be quoted because his firm is involved in Adelphia's various financing efforts.

"It's a cash machine with fixed costs. The value per subscribed has escalated so much in the past few years because of this. This is not a Kmart or an Enron. These are real assets and they are really good assets."

Adelphia, which owns cable systems with more than 5.8 million subscribers, has put on the auction block its cable assets in Southern California, Florida, Virginia and the Southeast in an effort to raise cash to reduce debt.

While those are prime asset properties, other analysts and investors have said the company may have a hard time attracting buyers.

A sellside analyst at another shop restricted from commenting on the record said he would not recommend any of Adelphia's securities, even considering that the company has considerable assets.

"When you've got to sell something, you're not going to get the best price," the analyst said.

"It's like CIT for Tyco. It was a $10 billion company and now they will be doing good to get $6.5 billion."

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