Adelphia Communications announced surprise! more bad news on Friday morning.
The troubled cable television operator confirmed three pieces of bad news circulating in the market, further dimming the prospects of a speedy extrication from its debt-induced troubles and raising the specter of a bankruptcy filing.
On Wednesday, according to Adelphia, the company and its subsidiaries failed to pay $44.7 million in interest and preferred stock dividend payments, though it did that day make interest payments totaling $4.8 million on bank credit facilities. The company’s stock has been crushed in the last two months, destroying more than $5 billion in shareholder value, as investors have grown increasingly skeptical of Adelphia’s financial condition.
Adelphia decided not to make the payments “because we are now pursuing a thorough evaluation of Adelphia’s business objectives and financial requirements,” says a statement from Chairman and acting CEO Erland “Erkie” Kailbourne, who replaced Adelphia patriarch John J. Rigas earlier this week.
“Adelphia has valuable assets, and we are working to restore the confidence of our lenders and shareholders,” Kailbourne continued. “Our intention is to preserve and build upon the underlying value of the Company, and we will pursue the previously announced plan for asset sales to significantly reduce debt. We also hope to increase revenues from existing properties and reduce costs throughout the Company. As part of this process, we are carefully developing a full picture of our financial needs and we look forward to working with our lenders to address those requirements.”
Adelphia also acknowledged that grand juries in New York and Pennsylvania were investigating “certain matters” related to the company, and it said it had indeed had a scheduled hearing with the National Association of Securities Dealers Thursday regarding the possible delisting of Adelphia’s shares from the Nasdaq stock market. The NASD announced no decision following the hearing, Adelphia said.
Nasdaq suspended trading in Adelphia’s shares Wednesday morning, following the announcement that Rigas was stepping down and that the company was suspending the audit of its 2001 annual report pending the results of an internal company investigation.
Adelphia’s financial crisis began in late March, when the company disclosed that it was potentially liable for $2.3 billion borrowed by Rigas’ family, which owns a controlling stake in the cable TV operator and occupies a majority of the company’s board.
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