Speculation continues to grow that bankrupt cable operator Adelphia Communications will be sold rather than emerge from its Chapter 11 filing as a free-standing entity.

This week, two Wall Street analysts issued reports predicting that Adelphia will end up in the hands of another major cable-TV system operator -- though the analysts didn't agree who that operator would be.

Speculation so far has focused variously on Time Warner ( TWX) and Cox ( COX). Execs at both big cable operators have made vague comments suggesting possible interest in recent months though, of course, any deal remains far off in the future.

Still, an auction of Adelphia's assets has the potential to remake the country's cable TV landscape. With 5.4 million subscribers, Adelphia -- the nation's fifth-largest operator of cable TV systems -- is the largest system likely to go on the market in the foreseeable future.

Yet if such a deal were to take place this year, it would come counter to the plans of Adelphia's current management. CEO William Schleyer, who said in February that the company hadn't received any bids for its assets , is fighting to keep his vision of a stand-alone Adelphia the only plan on the table in the company's bankruptcy proceedings.

As indicated by a recent filing by one group of Adelphia bondholders, management has little support but plenty of opposition among creditors for the executives' request for additional time under which its reorganization plan is the only one under consideration.

Those objections will likely come to a head on April 26, when a hearing is scheduled in U.S. Bankruptcy Court in Manhattan to address whether Adelphia management should continue to have the exclusive right to file a reorganization plan. Whether the dissent will result in derailing management's plan -- and, in a distinct question, whether Adelphia will be sold off rather than end up as a free-standing entity -- won't be any clearer until the judge in the case, Robert E. Gerber, rules on the exclusivity issue.

Shares in Adelphia fell 4 cents Thursday to trade at 73 cents apiece. Pre-bankruptcy shares usually end up valueless following bankruptcy reorganizations, but shareholders are betting that an auction of Adelphia's assets -- the preferred outcome of Adelphia's Equity Committee in the bankruptcy proceedings -- will reap enough money to trickle down to shareholders once creditors ahead of them in line have been paid off.

Time Heals All Wounds

Saying that the pursuit of Adelphia as an acquisition "may commence before its emergence from Bankruptcy Court," Merrill Lynch analyst Jessica Reif Cohen wrote Tuesday that Time Warner, the nation's second-largest operator of cable systems, has an edge over the companies she says are the only other potential acquirers with enough balance sheet strength to buy Adelphia. Those are Comcast ( CMCSA), the nation's largest operator, and Cox -- which, along with debt-hampered Charter ( CHTR), rounds out the top four.

Time Warner has an estimated $18 billion in excess borrowing capacity, says Cohen. She says that's enough to fund the $20 billion purchase price that's the midpoint for her estimated range of the company's enterprise value, excluding joint venture minority interests.

That figure is $3 billion above the $17 billion at which Adelphia's management valued Adelphia in February -- a value that the equity committee and others have said is a lowball figure.

Using a valuation yardstick often employed in cable mergers and acquisitions, Cohen values Adelphia's subscribers at $3,900 apiece, higher than the $3,333 implied by the $17 billion valuation and higher than Cohen's calculation of the average of $3,500 at which shareholders of publicly traded cable operators are valuing those companies' subscribers.

Like AT&T Broadband, the operator acquired by Comcast in late 2002 that has proven a wildly successful turnaround property, Adelphia offers any acquirer a chance to generate "supra-normal cash-flow gains," writes Cohen. In fact, Cohen calls Adelphia the "Mini Me" of AT&T Broadband, in a reference to the tiny double of Dr. Evil in the Austin Powers movies. (Merrill has done recent banking for Time Warner, Cox and Comcast, and has managed an offering for Cox.)

Capital Idea

Fulcrum Global Partners analyst Richard Greenfield, however, says Cox is the most likely winning bidder, on the basis of such factors as its access to capital, ability to monetize its stake in Discovery Communications, and "the fact that Adelphia presents a unique opportunity to gain scale in the consolidating distribution landscape."

Asked at an investment conference last month to comment on Cox's interest in making acquisitions, Cox CEO Jim Robbins circumspectly replied that he thought Cox controlling shareholder Cox Enterprises "would be on the expansion side rather than on the contraction side," according to the CCBN transcript. He suggested, however, that Cox would wait for Adelphia to emerge from the bankruptcy process.

On Thursday, UBS analyst Aryeh Bourkoff published a note saying he no longer believed that Cox wanted to purchase Adelphia in its entirety. Following a meeting with Cox management, wrote he believed Time Warner would be the most logical lead buyer, with Comcast playing a lesser role in the purchase.

Asked about acquisitions at the same conference as Robbins, Jeff Bewkes, chairman of Time Warner's entertainment and networks group, was similarly coy. "I think we would say it would be generally good to have a higher footprint, depending on how we got there," said Bewkes, according to the transcript. "For us, that decision would essentially come down to price because we're trying to optimize our profit position."

While people have been waiting for Adelphia to emerge from bankruptcy as an independent entity and then get carved up, Greenfield writes, "We believe the current reorganization plan suggested by management is losing momentum."

Gumming up the works, says Greenfield, is a document that emerged in the bankruptcy proceeding, a letter indicating that Adelphia has a willing buyer for one of its joint-venture systems at an implied price of $4,500 per sub. That's well above even Cohen's per-sub estimate, though the offer covers only 140,000 subscribers, a small fraction of Adelphia's customers. The proposed purchase price of $625 million for the Puerto Rico systems at issue is 34% above the price at which Adelphia valued those systems last year, says Greenfield.

Greenfield says he believes an auction of all of Adelphia could reap an average of $3,700 to $4,000 per subscriber.

Addressing these reports, an Adelphia spokeswoman says, "There's been all kinds of speculation ongoing. And we're not going to comment on speculation. We still believe it's in the best interests for the greatest number of constituents for Adelphia to emerge from bankruptcy as an independent entity."

Pursuing Alternatives

Presaging a contentious hearing over the exclusivity issue -- and perhaps weak support for management's plan -- a filing by one interest party, the Ad Hoc Committee of Subordinated Noteholders, noted that 10 different groups had filed objections to management's request to continue its exclusivity another two months, while only one party had come out in support.

"These objections," according to the subordinated noteholders, "shed needed light on the Debtors' self-serving and misleading pronouncement that they have 'gained significant momentum' in achieving a consensual and confirmable plan of reorganization."

Among the objectors' concerns, says the committee, is Adelphia's "unwillingness to consider alternatives that could maximize value for all parties-in-interest."

Ending the exclusivity, says the committee, will allow creditors to pursue alternatives, including exploring a sale of Adelphia's assets.

While the committee says it doesn't necessarily favor the ultimate sale of Adelphia, "exploring a sale at this time is necessary to determine how best to maximize the value of the Debtors' estates, whether or not such a sale actually occurs."

Says an Adelphia spokesman, "Adelphia submitted its proposed plan of reorganization anticipating that there would be objections from parties, where in some cases there are parochial interests that they want to advance." In cases as big and complicated as Adelphia's bankruptcy, says the spokesman, "it's common for proposed plans of reorganization to be amended before approval in order to reflect solutions of significant issues, many of which are issues between or among creditors."

The spokesman says, "Adelphia believes that it's in the best interests of the company's overall reorganization to keep the Chapter 11 process moving toward completion. And we view that as the primary duty of the management and the board -- to keep that process moving."