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Lawyer to Adelphia Cities: File Claims

Every city with an Adelphia Communications Corp. franchise should file claims in bankruptcy court against the operator for payments of all fees due, to ensure the operator acknowledges and accepts its local contracts going forward, a bankruptcy specialist advised regulators.

At a meeting here last week of SCAN NATOA — made up of regulators from California and Nevada — attorney Frank Zerunyan of the Los Angeles firm Sulmeyer Kupetz explained that Adelphia recently filed for another extension of the submission date for its reorganization plan, this time setting it for Oct. 23. By them, all of the operator's contracts, including franchises, must be assumed or rejected.

"If your contract is lucrative, it will be assumed," and Adelphia will be required to pay all debts, cures defaults and abide by local laws, he told regulators.

Questioned after the presentation, Zerunyan predicted the company would reject a number of franchises to limit its exposure in its restructuring plan. He did not quantify the number of systems he believes Adelphia might walk away from.

He based his opinion on factors such as operating reports to the bankruptcy trustee that show the company continues to operate $6.5 million "in the hole on an ongoing basis."

An abandonment strategy would leave the physical plant in the hands of local regulators, which may sell it to a new operator.

But potential buyers would be on notice, given Adelphia's action, that the property for sale was a poorly performing one, making it difficult to sell for market rates, he predicted.

Regulators questioned how they could submit an accurate claim against the operator, given that Adelphia has recently restated its subscriber figures.

For instance, Los Angeles recently ordered its Adelphia system to roll back basic rates, because current Adelphia management can't certify local cost and customer-count figures.

"Go ahead and file on estimated numbers," Zerunyan advised. The worst that can happen is that Adelphia can object to the figures and provide the correct numbers, he said.

Regulators have been prevented from participating in the creditor's committee in the Adelphia bankruptcy, as the law limits participation to "persons" and not government agencies. Lobbyists for localities are circulating a proposed redraft of federal bankruptcy law that would change the policy, giving regulators standing in future bankruptcies.