Adelphia challengers holding up Time Warner Cable

Posted Jan 24th 2007 12:35PM by Jon Ogg
Filed under: Deals, Law, Time Warner (TWX), Comcast Cl'A' (CMCSA)

There have been reports -- starting last week and ongoing this week -- that the real debut of Time Warner Cable (TWC-TWCAV) under the "TWC" ticker is being held up by challengers to the Adelphia bankruptcy plan. The plan was originally approved by the main creditors and by Time Warner, Inc. (NYSE: TWX) and by Comcast Corporation (NASDAQ: CMCSA-CMCSK). But now, the issue at stake is that a US District Court judge has suspended when the bankruptcy court's approval takes effect until the decision can be reviewed by a higher court.

Associated Press has covered this and several news outlets have picked up the story. (Here is the story by Newsday, the story from Cantonrep.com, and a more detailed story here.)

What is most important here is that minority holders are holding up the launch of Time Warner Cable. The other problem is that both Time Warner and Comcast have already made their swaps and already completed the beginnings of the integration plans. This last ditch effort by the group trying to block this deal could come with a hefty price tag. Ultimately they can't stop this and it's a done deal, but they can perhaps net themselves some extra cash in the final hour.

The judge ruled that the creditors have to post a $1.3 billion bond within 72 hours to stop this, and they have only 24-hours to post $130 million. What is noted as the possible upside for the dissenting challengers is $250 million. So how much is this attempt worth?

It is sort of surprising that that the judge went ahead with the suspension this late in the game. Basically, it only serves to add an unknown time delay to an event that has already occurred.

Who knows, maybe they'll go ahead and file an appeal to free Saddam too? Maybe they'll get the Rigases out of jail to come testify for them as qualified expert witnesses? This group of creditors may get something more. But to me, it brings to mind the Exodus Communications investors who refused to send in their shares for the tax write-off rather than admitting they got hosed.

And now Time Warner Cable shares may continue to trade on a "when-issued status" longer than Wall Street was expecting. This will be resolved -- that is certain -- but what isn't clear is how much more money it is going to cost. TWX is up 0.1%at $22.49 and TWCAV shares appear unchanged on last look at $42.75. Comcast (CMCSA) shares are up almost 1% at $44.97.

But, if you think this decision isn't affecting the markets, take a look at the remaining shares of Adelphia (ADELQ-OTC Pink Sheet). ADELQ shares are up 29%, at a whopping $0.035.

Jon Ogg is a partner in 24/7 Wall St., LLC; he does not own securities in the companies he covers.

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