Adelphia converts find buyers with bids as low as 19

By Ronda Fears

Nashville, Tenn., June 7 - Some buyers emerged for Adelphia's convertibles Friday even as headlines reported the company inflated its subscriber numbers by as much as 10% and that it kept two sets of accounting books.

"We were seeing interest, a few buyers," said a convertible trader at a major investment bank.

"I wouldn't say there was a lot of trading, but $1 million here and there."

The 3.25% and the 6% issues were trading at about the same level, both down about 23 points. Traders said the bonds traded as low as 19 but firmed in the afternoon to 24.

Adelphia shares were said to have traded over-the-counter at 20c. The stock was delisted as of Monday after closing Friday at 70c on the Nasdaq.

"I'm absolutely amazed that anybody is buying these," said Jeremy Howard, head of U.S. convertible research at Deutsche Bank Securities Inc.

Recovery hopes are driving the activity, traders said, but it seems only a few players in the market believe there will be much for convertible holders.

Some had been putting recovery levels in the 70s until earlier this week when Moody's downgraded Adelphia and said recovery would be slim to none for convertible holders as the stock would surely be wiped out in what's considered an inevitable road to bankruptcy for the sixth largest U.S. cable company.

Adelphia has not filed its 2001 annual report with the SEC, which caused the stock to be delisted from the Nasdaq. It is in default on bank credit agreements, missed $44.7 million of interest and dividend payments and the puts on the $1.4 billion of convertible debt have been triggered.

While Adelphia has until June 15 deadline to make the interest payments, it is not expected to do so.

The company has been trying to sell assets, but that effort got a severe blow from the headlines Friday.

"If you thought they had 5.8 million cable subscribers, as they were saying, you would think there would be some level of recovery for even the bottom of the pile, which is where the convert guys are," said Stuart Novick, convertible analyst at Salomon Smith Barney.

"Now, we don't know that's the case."

Howard said the situation underscores a common problem in the bond market - that holders are too optimistic about recovery risk, particularly with subordinated debt.

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