Adelphia shares drop 40% on delisting

NEW YORK (CBS.MW) — Shares of Adelphia Communications were off nearly 40 percent Friday after the Nasdaq Stock Market said it would delist shares of the beleaguered company after it failed to file required financial statements with the Securities and Exchange Commission.

The Nasdaq also cited “public interest concerns” as a reason for the delisting, which was announced late Thursday. The stock fell 46 cents to 70 cents with 120 million shares changing hands — the most active Nasdaq issue.

said Friday its failure to file required financial information resulted in defaults under certain credit agreements. This entitles lenders to accelerate the maturity of their debt and to exercise additional remedies.

The cable company has still not completed its financial reports for the fiscal year ended Dec. 31. Deloitte & Touche, Adelphia’s long-time auditor, has suspended its audit of those financial statements.

As a result of the delisting, Adelphia will be required to make an offer to purchase all of its outstanding 6 percent convertible subordinated notes due Feb. 15, 2006, and its 3.25 percent convertible subordinated notes due May 1, 2021.

The company said it’s in discussions to obtain additional capital over the near term while “continuing” its previously announced initiative to sell selected assets. The Wall Street Journal reported Wednesday that Adelphia was in talks to sell Los Angeles cable systems that serve about 1 million subscribers to Charter Communications
for as much as $3.5 billion.

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Adelphia had said May 8 that it is taking bids on lucrative systems in Southern California, Florida, Virginia and the Southeast.

Late Thursday, Chief Executive Erland Kailbourne responded angrily to a letter from Leonard Tow, Adelphia’s biggest shareholder. Tow, who this week agreed to a settlement that will give him two seats on the company’s board, had objected to selling any of the cable systems.

In his letter to Tow, Kailbourne said he thought Tow had agreed with him that such asset sales are “essential to the company’s survival.”

“We have asked you for any concrete proposal you have as to how to restructure the company’s debt,” Kailbourne went on. “While I did not intend to press you for any specific plan you might have until [the company’s board meeting on] Saturday, in light of your objection to the planned asset sales I would ask you to provide me in as much detail as you are now able, what specific, concrete alternative or alternatives you propose. You will, I know, understand that general ideas without concrete details as to how they will be implemented are of little use at this time.”

Last week, Adelphia’s founding Rigas family formally gave up control of the company that John Rigas established in 1952. See full story.

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Adelphia stock has plunged since late March, when during an otherwise upbeat first-quarter conference call the company declined to answer an analyst’s question about what was then believed to be $2.3 billion in off-balance sheet debt. Subsequently, the amount was placed at more than $3 billion.

The shares dropped as investors, already jittery about co-borrowing deals in the wake of the Enron scandal, distanced themselves from Adelphia.

Adelphia’s delisting will be effective at the open on Monday. Dollar Tree Stores
will replace Adelphia in the Nasdaq 100

Nasdaq said Dollar Tree would also be included in the Nasdaq 100’s tracking index
Dollar Tree on Friday rose $1.46 to $38.97.

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