By Ronda Fears
Nashville, Tenn., May 24 - The picture is becoming a bit clearer about Adelphia's debtload, although the total is still not entirely apparent. John Levin, head of JPMorgan convertible research, said any move by Adelphia's banks to help the company stay out of bankruptcy for at least another year would benefit holders of the 3.25% converts.
Levin said he was not making any recommendation on the Adelphia convertibles just yet.
"We're waiting to see it if goes bankrupt," Levin said.
Meanwhile, he said it would behoove the banks to help keep the cable company from filing bankruptcy. That would likely impair Adelphia stockholders and junior creditors further, but a delay would benefit holders of the 3.25% converts since the bonds are putable at par in May 2003.
"The magnitude of the bank borrowings by Rigas family entities is surprising - $3.1 billion. At present, there is insufficient information to determine qualitative aspects of these loans, however, it is almost certain these loans would be impaired, and perhaps deeply impaired, were it not for the guarantees provided by Adelphia subsidiaries," Levin said in a report.
Consequently, it is expected that Adelphia's banks will continue to seek consolidation of the managed entities' debt and assets onto Adelphia's balance sheet.
"Doing so will replace Adelphia guarantees, which could prove quite shaky in a bankruptcy court environment, with the direct assumption of such debt by Adelphia. Should this trend continue, equity holders and junior creditors will have their respective positions worsened," Levin said.
"Holders of 3.25% convertible notes, however, should benefit from this trend, as it encourages Adelphia's bank lenders to keep the company out of bankruptcy for at least another year, long enough to allow the 3.25s to be put back to the company on May 1, 2003, at par for cash."
Furthermore, the 3.25s and Adelphia's 6% convertible bonds are putable at par if Adelphia's stock is not quoted on a major exchange.
Nasdaq lifted the suspension of trading of Adelphia common stock on Thursday, which had been in place since May 15.
Levin said the resumption of trading indicates satisfaction by Adelphia of Nasdaq's listing requirements, but does not ensure the delisting threat has been eliminated.
Adelphia convertibles, with stock at $2.62
| 3.25% due 2021 | 6.0% due 2006 | 5.5% pfds | 7.5% mand. '04 | 7.5% mand. '05
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| Price | 55 | 47.5 | 42 (par 200) | 5.65 bid (par 25) | 4.37 (par 25)
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| Yield to Maturity/Put | 78.16% | 29.82% | Perpetual | NA | NA
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| Current Yield | 5.8% | 12.37% | 26.19% | 31.8% | 42.91%
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| Conversion Price | $43.758 | $55.49 | $81.45 | $21.50 | $25.201
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| Premium | 838.9% | 931.1% | 555.3% | $2.86 | $1.78
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| Issue Size | $575 million | $862.5 million | $575 million | $345 million | $575 million
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