Sale-Minded Adelphia Hires Bankers

Adelphia Communications hired bankers to help explore the sale of the cable operator.

The appointments -- which are subject to bankruptcy court approval -- signal a long-awaited forward motion in the resolution of Adelphia's bankruptcy case, and a possible remaking of the cable industry landscape.

Adelphia, the nation's fifth largest operator of cable TV systems, filed for bankruptcy protection in 2002, following revelations that the company was potentially on the hook for $2.3 billion in borrowings by the family which had controlled Adelphia for decades.

Adelphia Founder John Rigas and one of his sons, former CFO Tim Rigas, were found guilty last week of fraud and conspiracy charges related to their activities at Adelphia. Another son, former executive vice president Michael Rigas, was cleared of some charges but had a mistrial declared on others. A fourth former executive, one-time assistant treasurer Michael Mulcahey, was found innocent on all counts.

Simultaneous with the criminal trial, participants in Adelphia's bankruptcy proceedings have battled over the fate of the cable operator, whose headquarters have been relocated from the Rigas family's home town of Coudersport, Pa., to Greenwood Village, Colo.

Adelphia's new management, led by Chairman and CEO Bill Schleyer, has been pushing to have the company exit bankruptcy as a free-standing entity. But some debtors, along with Adelphia's current equity holders, have argued that Schleyer's team has understated Adelphia's value, and that holders of Adelphia's securities would reap more money if the company's assets were sold directly out of bankruptcy.

Bowing to these arguments, Adelphia's management announced in April that it would explore the possible sale of the company.

But progress in such a sale has been elusive, a major stumbling block reportedly being that so many Wall Street players are involved in Adelphia-related litigation.

In early June -- six weeks after the announcement that Adelphia might go on the block, Cox Communications ( COX) CEO Jim Robbins publicly declared the auction process "just a mess" and "horrible." Not mincing words, Robbins added, "The process is so disgusting that we don't want to get anywhere near it."

Cox, Comcast ( CMCSA) and Time Warner ( TWX) have been seen as likely candidates to buy at least part of Adelphia. In a report last month, for example, Merrill Lynch analyst Jessica Reif Cohen outlined a scenario in which Time Warner could merge its own cable systems with Adelphia's while spinning off subscribers to Comcast in exchange for Comcast's minority stake in Time Warner Cable.

In its announcement Wednesday, Adelphia said it had selected UBS Investment Bank and Allen & Company as its financial advisers in the sale of the company, and the law firm Sullivan & Cromwell as its legal adviser.

An Adelphia spokesman says there's "nothing public right now" about any potential conflicts between Allen & Co. or UBS and Adelphia, but adds that both firms will have to file affidavits when Adelphia files a motion with the bankruptcy court to retain them.

UBS analyst Aryeh Bourkoff has been following Adelphia's operations since its bankruptcy filing, publishing monthly notes about the company's own monthly operating reports. Allen & Co. is the media investment bank which recently held its annual, exclusive retreat for movers-and-shakers in Sun Valley, Idaho.

No one from Adelphia attended the Sun Valley retreat, says the Adelphia spokesman.

Adelphia's stock, which is quoted on the pink sheets, fell a penny Wednesday to trade at 49 cents.

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