Bankrupt Excite@Home Corp.'s largest creditors turned up the pressure on
affiliate MSOs and AT&T Corp. with a filing in California bankruptcy court
late Friday, demanding that unless the MSOs cough up higher payments, the
cable-modem service should be shut down.
The creditors, collectively representing $747 million of Excite@Home's bond
debt, believe the company's domination by affiliate cable-company owners has
made it provide service at less than what it is worth, according to Martin
Bienenstock, a lawyer with Weil, Gotshal & Manges LLP who is representing
the bondholders' group.
'Excite should tell the cable companies that it will continue service if they
start paying what the service is worth,' Bienenstock said. 'But otherwise, it
will shut down.'
Excite@Home filed for Chapter 11 bankruptcy protection last month in U.S.
Bankruptcy court in Northern California. At the same time, AT&T offered $307
million for the Redwood, Calif.-based company's assets.
If the bankruptcy court agrees with the group's demand and orders the
shutdown, affiliate MSOs would have to kick in more money to the cable-modem
service to get it up and running again.
'How the cable companies want to deal with the money they should pay is up to
them, but they could either characterize it as a capital expenditure that they
make, like they pay for wires or machinery, or they could take the attitude that
it's an expense they want to pay us on through higher cable rates,' Bienenstock
said.
Cablers could also increase the revenue-sharing percentage for Excite@Home,
he added.
The bondholders hope increasing the value of the service will in turn up the
bidding for its assets.
When asked how much more in payment the creditors are seeing, Bienenstock
pointed to the $307 million AT&T bid. 'If they want to turn around and buy
the company, we're saying it will cost them a bit over $1 billion,' he said.
Sarah Eder, AT&T Broadband's director of external communications,
declined to comment on pending litigation.
The development isn't the first to threaten subscriber operations for
Excite@Home. Two weeks ago, the company and its creditors decided to stop
provisioning new customers, citing cash conservation during the bankruptcy.
Last week, most of the affiliate cable MSOs responded by forging agreements
to reinstate new subscriber provisioning in exchange for undisclosed payments to
support operations.
