Ending weeks of speculation,

Adelphia Communications


conceded Thursday that it will probably have to restate its financials for the last three years to change its accounting for related parties' borrowings.

Adelphia shares, already off 65% over the last month since the company surprised Wall Street with a late March disclosure of off balance sheet debt guarantees, dropped 10% in early trading before recovering to trade only modestly lower. Adelphia, whose debt dealings and accounting practices are the subject of a

Securities and Exchange Commission

investigation, dropped 16 cents to $6.79.

The Coudersport, Pa., cable television system operator didn't specify the degree to which it would need to change the bottom line on its 1999, 2000 and 2001 financials. But the company said it would cut its shareholders equity, or net worth, by the amounts payable the Rigas family entities whose debt Adelphia guaranteed. That would cut shareholders equity by $1.6 billion in 2001, $1.2 billion in 2000 and $700 million in 1999, the company said.

Adelphia also said that its delay in filing its annual report had put it in default of some debt. The company said it was operating under a grace period on some of those obligations and that it had a waiver until May 16 on certain subsidiary debt.

Adelphia said it "intends to issue a press release indicating its anticipated timing for filing its Form 10-K as soon as practicable."

Following Adelphia's disclosure of potential off balance sheet liabilities, shares in the cable operator have tumbled, fed by investor concerns about newly disclosed risks and possible undisclosed ones. Since the original revelation March 27 of $2.3 billion in possible liabilities, the company has missed two deadlines for filing last year's annual report, confirmed the existence of a formal inquiry into its "co-borrowing arrangements" and announced it faces delisting from the



And with Adelphia and the Rigas family that controls it not talking -- except for the occasional terse press releases relaying further bad news -- the information vacuum has been filled by rumors of accounting clashes, loose talk of asset sales and dismissals of Adelphia as an Enronesque accounting disaster.