Residents’ cable service won’t be affected, city officials say
Because of off-the-books borrowing by its founder, Santa Monica’s cable service provider filed for Chapter 11 bankruptcy protection this week.
Adelphia Communications Corp., the nation’s sixth-largest cable company, filed for bankruptcy on Tuesday in U.S. Bankruptcy Court in New York — a week after the company missed $96 million in bond interest and preferred stock dividend payments.
The company — which operates in 3,500 communities nationwide — has 1.2 million subscribers of basic cable service in the Los Angeles and San Diego areas. Adelphia officials said service will not be interrupted to any of its customers during re-organization of the company’s business affairs.
Adelphia officials stress that its local employees will continue to be paid and receive health insurance benefits, and local franchise authorities, programming suppliers and other vendors will continue to be paid.
Santa Monica renewed its five-year franchise with Adelphia last month, settling a two-year dispute for $3 million with the company over service problems.
The company also promised to provide better customer service, wire 44 public buildings — including City Hall, public school buildings and Santa Monica College — for cable and cable modem service, and adding three public access channels for local and regional government, as well as for educational purposes.
No increased costs stemming from the agreement’s conditions or from the settlement can be passed along to local consumers.
City officials said they entered into the contract with Adelphia specifically in case the company filed for bankruptcy or sold off its Southern California franchises — which company officials said they have not ruled out.
“It gives us a firm legal standing in being able to control the franchise more closely,” said Kate Vernez, assistant to city manager Susan McCarthy, who was involved in the negotiations with Adelphia. “Any new franchise would have to abide by the same agreement and it would require the city council’s approval.”
“Any new franchise would have to abide by the same agreement and it would require the city council’s approval.” — — KATE VERNEZ Assistant to the City Manager
But after signing the agreement with Santa Monica, the company’s financial troubles only grew deeper and more tangled since it was revealed last year that billions of dollars was being borrowed by the family of the company’s founder John J. Rigas.
Adelphia had been scrambling to sell assets or lure investors to ease a cash crunch as the Securities and Exchange Commission and two federal grand juries investigated debts amassed by the Rigas family, which relinquished control of the company last month.
The company said it reached an agreement for a $1.5 billion loan, arranged by J.P. Morgan Chase Bank and Citigroup USA Inc. and spread among a large number of banks, that would allow it to continue operating while it reorganizes.
Adelphia reported to the SEC in late May that it appeared the company had guaranteed $3.1 billion in loans to the Rigas family, much of it used to buy now-devalued Adelphia stock. The company said even those figures may change because the Rigases refused to review or provide information for the filings.
The company has said that the Rigas family for years had almost unfettered access to Adelphia’s coffers, using company cash or assets to help it buy and run the Buffalo Sabres hockey team, expand the family’s own personal cable company holdings, acquire timberland and invest in a golf course near the company headquarters in Coudersport in rural northern Pennsylvania. Many of the deals were never approved by Adelphia’s board, the company said.
In May, Rigas and his three sons stepped down from executive positions, and gave up seats on the board. The family also agreed to turn over $1 billion in assets and divert cash flow from family-controlled cable companies to try to help the company make debt payments.
Adelphia’s stock was delisted June 3 by the Nasdaq Stock Market for failure to file financial reports, and the company fired its accounting firm, Deloitte & Touche, naming PricewaterhouseCoopers to replace it. The company also revealed that both subscriber totals and cash flow figures for the past two years had been overstated.
(The Associated Press contributed to this story.)
Originally published in the Santa Monica Daily Press print edition on June 28, 2002. Read the original PDF.