In closing arguments in the four-day-long Adelphia Communications Corp.
bankruptcy hearing late Friday, equity-committee attorney Norman Kinel proposed
that if the appointments of William Schleyer and Ron Cooper are blocked, cable
legend Leonard Tow is ready to fill the void.
The equity committee -- co-chaired by Tow, one of Adelphia's largest
shareholders -- objected to Schleyer's and Cooper's appointments as chairman/CEO
and president/chief operating officer of Adelphia, respectively, mainly because
of the size of their employment contracts. Both men are slated to receive $40
million over the next three years if they are approved.
Kinel argued that Adelphia could find another CEO in 30 to 60 days. But in
the event Adelphia needed a CEO quickly, "Leonard Tow, a recognized industry
giant, remains prepared to step in immediately."
Tow, former chairman of Century Communications Corp. -- which he sold to
Adelphia in 1999 -- and current chairman of Citizens Communications Corp., would
fill the role temporarily, Kinel added.
Judge Robert E. Gerber cut Kinel off at that point because the offer was not
part of evidence submitted at the trial.
But Kinel's wasn't the only offer made during the hearing. Later, Larry
McMichael, an attorney representing Adelphia's founding Rigas family, suggested
that as part of Schleyer's and Cooper's compensation, they be offered equity in
Adelphia immediately.
McMichael stressed that the Rigases have no objection to Schleyer's and
Cooper's appointment, nor do they object to the size of their salaries. However,
the family feels that the stock-incentive compensation, because it was offered
in a dollar amount instead of a specific number of shares, would give the two
executives no incentive to increase Adelphia's equity value.
Schleyer is set to receive $10.2 million worth of Adelphia stock after its
emergence from bankruptcy, according to his contract. The value of the stock
would be measured as the average price of shares during a 15-business day
trading window upon emergence.
McMichael said the problem with that formula is that the incentive is to keep
the stock price as low as possible during the trading window in order to get a
larger number of shares.
"Give him stock right now so he has a vested interest in getting Adelphia out
of bankruptcy, not an incentive to do something else," McMichael said.
Adelphia stock was priced at 18 cents each in 4 p.m. trading
Friday.
