Adelphia Communications Corp.'s ruling Rigas family reached a deal with a
special committee of Adelphia's board of directors, agreeing to relinquish
control of the MSO and to transfer assets from family partnerships to Adelphia
totaling $1 billion.
In a press release Thursday, Adelphia said cofounder John Rigas and his sons
-- former chief financial officer Timothy, executive vice president of
operations Michael and executive VP of strategic planning James -- all resigned
from the board of directors.
Michael and James have also resigned as officers of the company. Tim Rigas
resigned his position May 17.
John Rigas, who resigned as chairman and CEO of Adelphia May 16, will receive
a severance package of $1.4 million per year for three years as a result of the
agreement.
The special committee also said it had passed resolutions asking Peter
Venetis, John Rigas' son-in-law, to relinquish his seat on Adelphia's board.
That leaves five vacant board seats at Adelphia -- the remaining four are all
outside directors. According to the release, two nonfamily directors designated
by the Rigases will be added to the board.
It is expected that the other three seats will be filled by Leonard Tow and
two of his designates -- Scott Schneider and Rudy Graf, vice chairman and
president of Citizens Communications Corp., respectively.
Tow, chairman of Citizens, is Adelphia's largest individual shareholder, with
about 12 percent of its stock. He had threatened to start legal action against
the company for the seats, which he said he is entitled to since selling his
Century Communications Corp. cable operations to Adelphia in 1999.
According to the press release, the Rigases also have agreed to contribute
cash flow of about $567 million from cable properties owned by family entities
to Adelphia to support family obligations under co-borrowing agreements and
company debt held by the Rigas family.
Also, cable properties held in Rigas-family entities will be transferred to
Adelphia at their appraised value.
The Rigases -- who own about 20 percent of Adelphia's outstanding stock and
60 percent voting control -- also won't be able to block future moves by the
special committee. According to the release, the Rigases have agreed to place
all of their Adelphia shares into a voting trust until all of its obligations
are met. In addition, the special committee will vote the family's shares.
'I am very pleased that the Rigas family has agreed to transfer important
assets to the company,' recently appointed chairman and acting CEO Erland
Kailbourne said in a prepared statement. 'This is an appropriate step in on the
part of the Rigas family toward restoring the company's credibility with
shareholders, lenders and the marketplace as a whole.'
According to the release, Adelphia also increased the amount of debt from
Rigas-family partnerships it could be liable for as of Dec. 31 from $1.6 billion
to $2.5 billion. As of April 30, the company said that debt increased to $3.1
billion.
The MSO also appeared to dodge a bullet regarding its possible delisting from
the NASDAQ exchange. NASDAQ halted trading on Adelphia May 14 and said it would
not resume until it received more information.
Apparently, the press release was enough, as NASDAQ said Thursday that
trading on Adelphia stock would resume at 12:30 p.m.
Adelphia had said in the past that a delisting could trigger put agreements
to holders of $1.4 billion of its convertible bonds -- a move that could have
forced the company into bankruptcy.
Adelphia said it would release an 8-K filing with the Securities and Exchange
Commission later Thursday or Friday, disclosing certain related-party
transactions.
