Bankruptcy Judge Ready for Adelphia

U.S. Bankruptcy Court Judge Robert Gerber is expected to hear arguments in the Adelphia Communications bankruptcy case Tuesday morning, which could set the stage for the ultimate transfer of Adelphia’s 5 million subscribers to Time Warner Inc. and Comcast.

Adelphia, which has battled with its bondholders for months, petitioned the court in May to allow the sale to go through without approval of its bondholders. That process would essentially allow Adelphia to put the proceeds of the sale in escrow to be distributed to its creditors after they work out their differences.

Both Time Warner and Comcast have revised their agreements for the sale, allowing for the cram-down for most of the Adelphia assets without a reorganization plan or creditor approval.

Not included in that agreement are Adelphia’s Century-TCI and Parnassos joint ventures -- Comcast owns 25% and 33% of those partnerships, respectively -- which would require a reorganization plan and creditor vote. Adelphia hopes the Century-TCI and Parnassos deals can be consummated at the same time as the cram-down, if it is approved.

Comcast and Adelphia entered into the Century-TCI and Parnassos JVs in the late 1990s. Century-TCI has about 640,000 subscribers in the Los Angeles area and Parnassos has about 408,000 customers in western New York and Ohio. As part of the complicated deal, Comcast is expected to swap Century-TCI and Parnassos to Time Warner for systems in other areas.

Gerber -- who has presided over the Adelphia bankruptcy since it began in June 2002 -- scheduled a hearing on the matter for Tuesday at 9:45 a.m. (EST) in Manhattan.

If Gerber approves the cram-down, the Adelphia sale will still have to pass muster with the Federal Communications Commission. Last week, FCC chairman Kevin Martin said the commission would act on the Adelphia acquisition in mid-July.

Time Warner and Comcast agreed to purchase Adelphia’s assets in April 2005, originally in a cash and stock deal valued at $17.6 billion. Since that time, the purchase price was reduced to $16.9 billion, mainly because of a reduction in the stock portion of the deal.

As part of the transaction, Time Warner would spin off a portion of its cable unit -- Time Warner Cable -- as a separate publicly traded stock simultaneously with the closing of the deal.