Time Warner Cable Files for IPO

Time Warner Cable filed documents early Wednesday morning for its long-awaited initial public offering -- a move that could finally close the books on its joint $17.4 billion purchase with Comcast of Adelphia Communications.

According to the preliminary prospectus, filed Wednesday morning with the Securities and Exchange Commission, Adelphia would receive about 16% of Time Warner Cable stock, or about 156 million shares. The remaining 84% of the common equity would stay with Time Warner. Time Warner will also retain all of the cable company’s class-B supervoting shares, giving it 90.6% voting control of the company.

Time Warner will not sell any of the shares in the IPO, nor will it receive any proceeds from the deal. As part of its July 31 purchase agreement with Adelphia, the latter agreed to sell 33.3% of its Time Warner Cable stock in the IPO, or about 52 million shares, which will ensure that the stock has a public float.

Time Warner Cable did not assign a per-share value to the stock in the preliminary filing, but based on the number of shares it will issue to Adelphia and the $5.5 billion value placed on that stock, the company is assuming a $35.25-per-share value for the IPO.

This would put Time Warner Cable, the second-largest cable operator in the country, in the same league as Comcast, which is trading in the $38-per-share range.

Jefferies cable analyst Robert Routh said that based on that valuation, a Time Warner Cable IPO could ultimately fetch anywhere from $35-$40 per share. “This [IPO] is going to be so oversubscribed it’s ridiculous,” he added.

But the IPO could just be a placeholder for what Time Warner Cable really wants: to fold the cable company into the Adelphia shell company and avoid an IPO altogether.

That, however, would require Adelphia’s fifth plan of reorganization, filed Oct. 12, to be approved by the bankruptcy court. So far, five of Adelphia’s biggest bondholders have recommended approving the plan, while two -- Bank of America and ACC Bondholder Group -- have recommended rejecting the plan and forcing Adelphia into a Chapter 7 liquidation.

While Adelphia essentially has no assets to liquidate, Bank of America has said in bankruptcy court filings that a Chapter 7 would allow funds to be distributed to creditors more quickly.

In the reorganization plan filed Oct. 12, Adelphia objected to a Chapter 7 liquidation for several reasons, including that it would force Time Warner Cable to initiate an IPO, which could cost the No. 2 cable operator more than $600 million.

A Nov. 27 hearing has been scheduled in U.S. Bankruptcy Court for the Southern District of New York regarding the latest reorganization plan (www.multichannel.com/article/CA6382173.html).