DOJ Could Seize Adelphia Systems, Delay Sale

Dec 14, 2004  •  Post A Comment

A potential wrench has been thrown into the Adelphia Communications’ sales process, after the U.S. Department of Justice asked a federal judge to enter a $2.53 billion judgment against two members of Adelphia’s founding family in an attempt to seize some cable systems that could be part of a sale of the bankrupt cable company.

News of the Justice Department request came Tuesday in a Wall Street Journal article, which stated the U.S. Attorney’s office in New York requested late Friday that the government be allowed to seize a number of cable systems that are managed by Adelphia but technically owned by the Rigas family, which founded Adelphia.

Justice Department officials are seeking the systems as part of a settlement on a $2.53 billion claim against company founder John Rigas and his son, former Chief Financial Officer Timothy Rigas. Both John Rigas and Timothy Rigas were convicted of fraud and conspiracy, and the $2.53 billion claim represents the amount the government says the Rigases received as a result of their illegal dealings.

If the government wins the judgment, it could attempt to seize the cable systems, which serve around 225,000 customers and are valued at around $700 million to $900 million. They include systems in California, suburban Atlanta and Coudersport, Pa., the former home to Adelphia, according to the paper.

But that could complicate Adelphia’s plans to sell itself, since unsecured creditors have made clear their unwillingness to use proceeds of a sale to settle any government claims.

Adelphia officials have said they expect to pick a buyer in the 2005 first quarter, and analysts have estimated the cable company and its 5.3 million subscribers, could fetch as much as $20 billion. As many as 40 suitors, including Time Warner and Comcast, are interested in some or all of Adelphia.

However, if the company can’t strike a sale, the company will emerge from bankruptcy in the second half of 2005.