================================================================= ADELPHIA BANKRUPTCY NEWS Issue Number 2 ----------------------------------------------------------------- Copyright 2002 (ISSN XXXX-XXXX) April 2, 2002 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- ADELPHIA BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. Each issue is prepared by Peter A. Chapman, Editor. Subscription rate is US$45 per issue. Any re-mailing of ADELPHIA BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00013] NOTICE OF REASSIGNMENT OF CASES TO JUDGE GERBER [00014] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES [00015] DEBTORS' APPLICATION TO EMPLOY WEIL GOTSHAL AS COUNSEL [00016] DEBTORS' MOTION TO HONOR PREPETITION CUSTOMER OBLIGATIONS [00017] DEBTORS' MOTION TO CONTINUE USE OF BANK ACCOUNTS [00018] DEBTORS' MOTION TO CONTINUE USE OF CASH MANAGEMENT SYSTEM [00019] DEBTORS' MOTION TO PAY PREPETITION EMPLOYEE OBLIGATIONS [00020] DEBTORS' MOTION TO CONTINUE CURRENT INVESTMENT POLICY [00021] DEBTORS' MOTION TO CONTINUE WORKERS' COMPENSATION PROGRAM [00022] DEBTORS' MOTION TO DETERMINE UTILITIES ADEQUATELY ASSURED [00023] ABIZ WON'T FILE 2001 ANNUAL REPORT ON TIME KEY DATE CALENDAR ----------------- 03/27/02 Voluntary Petition Date 04/11/02 Deadline for filing Schedules of Assets and Liabilities 04/11/02 Deadline for filing Statement of Financial Affairs 04/11/02 Deadline for filing Lists of Leases and Contracts 04/16/02 Deadline to provide Utilities with adequate assurance 05/26/02 Deadline to make decisions about lease dispositions 06/25/02 Deadline to remove actions pursuant to F.R.B.P. 9027 07/25/02 Expiration of Debtor's Exclusive Plan Proposal Period 09/23/02 Expiration of Debtor's Exclusive Solicitation Period 03/26/04 Deadline for Debtor's Commencement of Avoidance Actions 03/26/04 Expiration of ACC-Backed DIP Financing Facility Organizational Meeting with UST to form Committees Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 USC Sec. 341 ----------------------------------------------------------------- [00013] NOTICE OF REASSIGNMENT OF CASES TO JUDGE GERBER ----------------------------------------------------------------- Vito Genna, Chief Deputy Clerk of the Bankruptcy Court for the Southern District of New York, indicates the reassignment of the Debtors' cases from Judge Bernstein to Judge Gerber due to a conflict of interest in Judge Bernstein's initial assignment. ----------------------------------------------------------------- [00014] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES ----------------------------------------------------------------- The Debtors sought and obtained entry of an order directing joint administration of these cases for procedural purposes only, pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure. Judy G.Z. Liu, Esq., at Weil Gotshal & Manges LLP in New York, tells the Court that joint administration of these cases avoids duplicative notices, applications, and orders, thereby saving the Debtors considerable time and expense. "The rights of creditors are not adversely affected as this Motion requests only administrative, and not substantive, consolidation of the estates," Ms. Liu stresses. Judge Gerber orders that all pleadings and papers filed in these jointly administered cases be captioned: UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK --------------------------------x : In re : Chapter 11 Case No. : 02-11389 (REG) ADELPHIA BUSINESS SOLUTIONS, : INC., et. al., : : (Jointly Administered) Debtors. : : --------------------------------x Judge Gerber makes it clear that nothing contained in the Debtors' Motion or the Court's Order contemplates nor precludes a substantive consolidation of the Debtors' estates. Additionally, the Debtors obtained authority to file the monthly operating reports required by the United States Trustee Operating Guidelines on a combined basis. ----------------------------------------------------------------- [00015] DEBTORS' APPLICATION TO EMPLOY WEIL GOTSHAL AS COUNSEL ----------------------------------------------------------------- The Debtors ask the Court's for permission to employ Weil Gotshal & Manges LLP as their attorneys in connection with the commencement and prosecution of their Chapter 11 cases. ABIZ Vice President John B. Glicksman tells the Court that the Debtors selected Weil Gotshal as their attorneys because of that firm's knowledge of the Debtors' businesses and financial affairs. "This firm has extensive general experience and knowledge, and in particular, has recognized expertise in the field of debtors' and creditors' rights, and business reorganizations under Chapter 11 of the Bankruptcy Code," Mr. Glicksman says. Weil Gotshal is actively involved in a numerous major Chapter 11 cases. These cases include representation of the debtor(s) in Enron Corp., Global Crossing Ltd., Bethlehem Steel Corporation, Rhythms NetConnections Inc., Armstrong Worldwide Industries, Sunbeam Corporation, Ames Department Stores, Inc., Genesis Health Services Corp., Carmike Cinemas, Inc., DIMAC Holdings, Inc., Sun Healthcare Group, Inc., Bruno's, Inc., United Companies Financial Corporation, Consolidated Hydro, Inc., Olympia & York Development Limited, Texaco, Inc., Edison Brothers Stores, Inc. (I) and (II), F&M Distribution, Inc., G. Heileman Brewing Company, Inc., R.H. Macy & Co., Inc., Weiner's Stores, Best Products Co., Inc. (I) and (II), P.A. Bergner & Co. Holding Company, Grand Union Corporation and the Drexel Burnham Lambert Group, Inc., among others. In connection with its pre-petition representation of the Debtors and the commencement of these Chapter 11 cases, Mr. Glicksman relates that Weil Gotshal has become familiar with the Debtors' businesses, affairs, and capital structure. Accordingly, Weil Gotshal has the necessary background to deal effectively with many of the potential legal issues and problems that may arise in the Debtors' Chapter 11 cases. The Debtors believe that Weil Gotshal is both well qualified and uniquely able to represent them in their Chapter 11 cases. Were the Debtors required to retain attorneys other than Weil Gotshal, Mr. Glicksman tells the Court that the Debtors, their estates, and all parties concerned would be unduly prejudiced by the time and expense necessarily attendant to such attorneys' familiarization with the intricacies of the Debtors' affairs and business operations. Specifically, Weil Gotshal will: A. take all necessary action to protect and preserve the estates of the Debtors, including the prosecution of actions on the Debtors' behalf, the defense of any actions commenced against the Debtors, the negotiation of disputes in which the Debtors are involved, and the preparation of objections to claims filed against the Debtors' estates; B. prepare on behalf of the Debtors, as Debtors In Possession, all necessary motions, applications, answers, orders, reports, and other papers in connection with the administration of the Debtors' estates; C. negotiate and prepare on behalf of the Debtors a plan of reorganization and all related documents thereto; and D. perform all other necessary legal services in connection with the prosecution of these Chapter 11 cases. Judy G.Z. Liu, Esq., at Weil Gotshal, assures the Court that the members and associates of the firm do not have any connection with or any interest adverse to the Debtors, their creditors, or any other party in interest, or their respective attorneys and accountants, except to the extent that it has represented, is currently representing, or has in the past represented claimants in matters unrelated to these cases. A. Lessor: 2401 Locust Associates, Amherst Commerce Bank, Avaya Financial Services, Ck Three Tower Center LLC, Cushman & Wakefield, Fidelity Leasing, First Union National Bank/Wachovia Bank, FV Office Partners L.P., Guardian Life Insurance Company, Media One of Greater Florida Inc., Niagara Frontier Cable Television, Parkway Properties L.P., PNC Bank, Prudential Insurance Company of America, Trinet TrizecHahn Columbia IV, and Warburg - Storagemart Partners LP; B. Shareholder: Alliance Capital Management LP, Capital Research & Management Company, Fidelity Management & Research Co., and JP Morgan Fleming Asset Mgmt.; C. Bondholder: American Express Financial Advisors Inc., Bear Stearns Asset Management, Blue Cross & Blue Shield of Michigan, Boston Company, Brinson Partners, Canyon Value Realization, CIGNA, Compass Series Trust High Yield Variable Fund, Connecticut General Life Insurance S.A/ Connecticut General Life Insurance Co., Credit Suisse First Boston, Deutsche Asset Management, Fidelity Management & Research Co., First Investors Fund for Income Incorporated, Frank Russell Investment Co., GE High Yield Fund, Hartford Fire Insurance Co., Hartford Fire Insurance Co., IDS Life Series Fund, ING Pilgrim Group, Insurance Company of the West, J.P. Morgan Investment Management Inc., Loomis Sayles & Co. LP, Los Angeles County Employees Retirement, Lutheran Brotherhood, Metropolitan Life Insurance Co., MFS Fund, Morgan Stanley, MSDW High-Yield Fund, Northstar Yield Bond Fund, Northwestern Investment Management Co., OFFIT Bank, Oppenheimer Funds Inc., Partners Healthcare System, Provident Life & Accident Insurance Co., Putnam Asset Allocation, RBC Dominion Securities Corp., Redwood Master Fund Ltd., Sheet Metal Workers National Pension Fund, Teachers Insurance & Annuity Association, Templeton Global Bond Managers Inc., UBS Warburg LLC, Unibank, UNUM Life Insurance Co. Of America, and W.R. Huff Asset Management; D. Underwriters: Bank of America Securities LLC, Bear Stearns & Co. Inc., Chase Securities Inc., CIBC Wood Gundy Securities Corp., CIBC World Markets, Credit Lyonnais Securities (USA) Inc., Credit Suisse First Boston Securities, Donaldson Lufkin & Jenrette Securities, First Union Capital Markets Securities, First Union Securities Inc., Goldman, Sachs & Co. Securities, NationsBanc Capital Markets Inc., Salomon Smith Barney Securities, and TD Securities; E. Vendor: Bell South, Broadwing Communication, Fujitsu, Graybar Electric Co., Home Depot, ICG Telecommunication, Interconnect Service, Lanier Worldwide Inc., Mass. Mutual, Metromedia Fiber, Minolta Corporation, Pacific Gas & Electric, Pitney Bowes Credit, Samsung Telecom, Siemens, Tellabs, Tyco Electronics, United Parcel Service, and Worldcom. Weil Gotshal will bill for legal services at its customary hourly rates: Members $375-$700 Associates $200-$400 Paraprofessionals $ 50-$175 Within the year prior to the commencement of the Debtor's Chapter 11 case, Ms. Liu informs the Court that Weil Gotshal received from the Debtor approximately $1,363,000 as compensation for professional services rendered through March 26, 2002. This sum also includes reimbursement for reasonable and necessary expenses incurred in connection with the services. Weil Gotshal is holding an additional retainer in the amount of $895,695 for professional services rendered and to be rendered in these Chapter 11 cases and an advance of $139,242 against expenses incurred and to be incurred in connection therewith. * * * Judge Gerber grants the application on an interim basis. The application is subject to a final hearing on April 16, 2002 if any objections are filed by April 10, 2002. If no objections are presented, Judge Gerber's interim order becomes a final order. ----------------------------------------------------------------- [00016] DEBTORS' MOTION TO HONOR PREPETITION CUSTOMER OBLIGATIONS ----------------------------------------------------------------- The Debtors obtained authorization to honor Pre-petition Customer Obligations in the same manner and on the same basis as those obligations were honored prior to the commencement of these Chapter 11 cases. Judge Gerber makes it clear that the Debtors' decision to honor any Customer Obligation does not constitute an approval or assumption of any Customer Program or related agreement or policy. According to Harvey R. Miller, Esq., at Weil Gotshal & Manges LLP in New York, certain of the Debtors' customers may hold contingent pre-petition claims against the Debtors for refunds, adjustments (including adjustments to billings), and other credits. While the Debtors do not believe that the amount of these Credits will be substantial, the aggregate sum of Credits that are accrued but unpaid as of the Commencement Date is impossible to determine. Historically, however, the amount of credits granted to customers on a monthly basis approximates $350,000. Mr. Miller adds that by their very nature, the amount of Credits arising from a pre-petition transaction that may become an actual obligation after the Commencement Date will not be determined until sometime in the post-petition period. In the ordinary course of their businesses, the Debtors implemented, from time to time, various customer rebate programs designed to encourage new customers to use the Debtors' services. Mr. Miller relates that the Debtors currently maintain a rebate program which was commenced February 8, 2002 and is scheduled to conclude on April 30, 2002 to encourage new customers to sign long term contracts for local-switch dial tone service, long- distance service, and Internet connectivity service. Through the Rebate Program, the Debtors offered specified rebates to prospective qualified customers who sign a contract for at least 1 year of service. The specific extent of these rebates depends on type of customer and the nature of the services purchased. Pursuant to the Rebate Program, Mr. Miller tells the Court that prospective Type I customers are entitled to a rebate of up to $2,000 for the purchase of local-switch dial tone service. Prospective Type II customers are entitled to a rebate of up to $1,000 for the purchase of such service. All prospective customers are entitled to an additional 20% rebate with the purchase of long-distance service. Additionally, prospective Type I customers are entitled to a rebate of up to $800 for the purchase of Internet connectivity service, and prospective Type II customers are entitled to a rebate of up to $400 for the purchase of such service. Mr. Miller believes the Rebate Program is beneficial to the Debtors' businesses since these programs have been instrumental in acquiring new customers. The Debtors estimate that as of the Commencement Date, the claims that may be made under the Rebate Program, for sales consummated prior to the Commencement Date, is approximately $122,750 in the aggregate. Mr. Miller submits that the success of the Debtors' business is totally dependent on the loyalty and confidence of their customers. Continued customer loyalty throughout the Chapter 11 process is essential to the viability of the Debtors' businesses and the Debtors' ability to reorganize. Any delay in honoring or inability to honor the Credits or Rebate Programs will severely and irreparably impair the Debtors' customer relations at a time when maintenance and expansion of customer loyalty and patronage are extremely critical. Mr. Miller assures the Court that the Debtors have sufficient funds, based on anticipated access to post-petition financing, to pay all amounts that are due, or may become due, regarding the Credits and the Rebate Program. Moreover, the Debtors relay that they will not honor or make any payments related to the Credits or the Rebate Program that, in their discretion, do not facilitate the Debtors' reorganization. ----------------------------------------------------------------- [00017] DEBTORS' MOTION TO CONTINUE USE OF BANK ACCOUNTS ----------------------------------------------------------------- The Debtors obtained authority to maintain their prepetition Bank Accounts in the ordinary course of business and to pay any ordinary bank fees that might be incurred following the commencement of these cases. Judy G.Z. Liu, Esq., at Weil Gotshal & Manges LLP in New York, relates that prior to the Commencement Date and in the ordinary course of their businesses, the Debtors maintained 7 bank accounts with their financial institutions. The Debtors routinely deposited and withdrew funds from the Bank Accounts by check, wire transfer, and automated clearing house transfers. Ms. Liu states that the Office of the United States Trustee mandates, as of the Commencement Date, closing all pre-petition bank accounts, opening of new accounts, and the immediate printing of new checks with a "Debtor in Possession" designation printed on them. The Debtors believe, however, that their transition into Chapter 11 will be smoother and less harmful to their operations if the Bank Accounts are continued after the commencement of these cases with the same account numbers, provided, however, that Checks issued or dated prior to the Commencement Date are not honored absent a prior order of the Court. By preserving business continuity and avoiding the monumental disruption and delay to the Debtors' payroll activity and daily business operations that would necessarily result from closing the Bank Accounts and opening new accounts, Ms. Liu believes that all parties in interest, including the Debtors' employees, vendors, and customers, will be best served. The benefit to the Debtors, their business operations, and all parties in interest will be considerable. In other large Chapter 11 cases, bankruptcy courts have recognized that strict enforcement of the requirement that a Debtor In Possession close its bank accounts does not serve the rehabilitative process of Chapter 11. Accordingly, these courts have waived such requirements and replaced them with alternative procedures such as those proposed here. In order to minimize expenses to the Debtors' estates, the Debtors are authorized by the Court to continue use of their current correspondence and other business forms. These include invoices, purchase orders and related vendor communications and documents, letterhead, envelopes, promotional materials, order forms, and other business forms. However, as soon as is practicable, the Debtors must manually imprint the legend "Debtor In Possession" on existing checks. Further, if the check stock or the business forms stock is depleted, then the Debtors must obtain new check stock and other business forms reflecting their status as Debtors In Possession. ----------------------------------------------------------------- [00018] DEBTORS' MOTION TO CONTINUE USE OF CASH MANAGEMENT SYSTEM ----------------------------------------------------------------- The Debtors obtained authorization from the Court to continue using their centralized cash management system. According to Harvey R. Miller, Esq., at Weil Gotshal & Manges LLP in New York, in the ordinary course of business and prior to the Commencement Date, the Debtors used a centralized cash management system similar to those utilized by other major corporate enterprises. The Debtors' cash management system is designed to efficiently collect, transfer, and disburse funds generated through the Debtors' operations and to record accurately the collections, transfers, and disbursements as they are made. Specifically, under the Debtors' cash management system, Mr. Miller explains that funds received from customers are transferred into a wholesale lock box at First Union Bank. Thereafter, the funds are designated for the appropriate business unit and are transferred to separate receipt accounts corresponding to the appropriate business unit, each of which maintains its own Receipt Account. None of the subsidiaries under the PECO and York business units are Debtors in these Chapter 11 cases. The Debtors, however, are able to allocate accurately revenues and expenses to each business unit and, therefore, no Debtor's revenues are used to fund the operations or pay the expenses of any non-Debtor affiliate. Mr. Miller adds that the Debtors also maintain a separate disbursement account for each of their business units corresponding to the Receipt Accounts. Disbursements to fund the ongoing operations of the Debtors, including payroll, contributions to employees' 401k plans, operating expenses, and other expenses, are made from the Disbursement Accounts. Mr. Miller tells the Court that the Debtors' cash management system constitutes an ordinary course, essential business practice. The cash management system provides significant benefits to the Debtors including the ability to: A. control corporate funds, B. ensure the maximum availability of funds when necessary, and C. reduce administrative expenses by facilitating the movement of funds and the development of timely and accurate account balance information. ----------------------------------------------------------------- [00019] DEBTORS' MOTION TO PAY PREPETITION EMPLOYEE OBLIGATIONS ----------------------------------------------------------------- The Debtors obtained authorization from the Court to pay, as they come due in the ordinary course of business, pre-petition employee obligations, including all tax obligations and benefit plan obligations, employee-related plans, programs, and policies, as they were in effect on the Commencement Date. Specifically, the Debtors request that the Court: A. authorize the Debtors to pay accrued and unpaid pre-petition Payroll Obligations, Commission Obligations, Bonus Obligations, Vacation Obligations, Paid Time Off Obligations, Payroll Tax Obligations, Employee Benefit Obligations, and Reimbursement Obligations; B. authorize the Debtors to maintain their Employee Benefits, including health, dental, life, accident, and disability insurance plans, 401(k) plan, on an uninterrupted basis, consistent with pre-petition practices, and to pay when due and in the ordinary course, all pre-petition reimbursements, premiums, Benefit Administration Obligations, and other pre- petition insurance obligations to the extent due and payable post-petition, provided that such authorization does not constitute an assumption of said plans, policies, and programs; C. authorize the Debtors to continue to honor their plans, policies, and programs with respect to vacation, sick and personal time, as such plans, policies, and programs were in effect as of the Commencement Date, provided that such authorization shall not constitute an assumption of said plans, policies, and programs; D. authorize and direct the Debtors' banks to honor and pay all Pre-petition and post-petition checks and fund transfers requested or to be requested by the Debtors relating to Pre- petition Employee Obligations and Benefit Administration Obligations that were not honored or paid as of the Commencement Date to the extent sufficient funds are on deposit; and E. authorize the Debtors to issue new post-petition checks or effect new fund transfers on account of the Pre-petition Employee Obligations and Benefit Administration Obligations to replace any pre-petition checks or fund transfer requests that may be dishonored or voided, and to reimburse their employees or the applicable taxing authority, as the case may be, for any fees and costs incurred by them in connection with a dishonored or voided check or funds transfer. Judy G.Z. Liu, Esq., at Weil Gotshal & Manges LLP in New York, New York, relates that in the ordinary course of their businesses, the Debtors incur payroll obligations to their employees throughout the country. The Debtors currently employ approximately 1,717 employees, of which 1,716 are full-time employees and one is a part-time employee. Of the full-time Employees, approximately 733 are hourly Employees and approximately 983 are salaried Employees. The one part-time Employee is a salaried Employee. The Debtors have incurred certain pre-petition obligations regarding their Employees that remain accrued and unpaid as of the Commencement Date. These obligations are either currently due and payable, or will become due and payable in the ordinary course of the Debtors' businesses on and after the Commencement Date. Wages, Salaries, and Other Compensation Expenses Employee obligations for wages, salaries and other compensation are: A. Payroll - Employees are paid on a bi-weekly basis. The Debtors' average bi-weekly gross payroll for all of salaried Employees is approximately $2,300,000. The average bi-weekly gross payroll for all of hourly Employees is approximately $1,000,000. On March 22, 2002, the Debtors paid their Employees for the payroll period ending on that date. Overtime amounts for the Debtors' hourly employees are paid two weeks in arrears. The Debtors estimate that, as of the Commencement Date, they owe approximately $655,000 for payroll obligations to Employees accrued after March 22, 2002. Additionally, the Debtors estimate, based on historical experience, that there may be as much as $100,000 in outstanding payroll checks from prior periods that remain uncashed by Employees as of the Commencement Date. These checks would be dishonored by the applicable bank if presented for processing after the Commencement Date. B. Commissions - Certain Employees, including those Employees in the Debtors' sales divisions, are entitled to receive commissions in addition to their base compensation. Commissions are based upon a percentage of sales generated or a percentage of the cost of installation of equipment performed by the Employee. These are paid to eligible Employees on a monthly basis. The Debtors estimate that as of the Commencement Date, approximately $450,000 in commissions are currently owed, or will be owed, at some point following the Commencement Date in connection with pre-petition services rendered by the Employees. C. Incentive Programs - Certain of the Debtors' Employees are paid bonuses in the ordinary course of the Debtors' business. Employees earn bonus payments as a percentage of revenue, and for meeting EBITDA and other targets. Bonus payments for revenue are made on a monthly basis, two months in arrears. Bonus payments for meeting EBITDA and other targets are paid quarterly. The Debtors estimate that, as of the Commencement Date, approximately $360,000 in bonus payments are currently or will be owed in connection with pre-petition amounts earned by Employees. D. Vacations - Under the Debtors' vacation policy, eligible Employees accrue vacation time based on length of service. Pursuant to the Vacation Policy, eligible Employees are paid their full wage for each vacation day, up to the maximum number of days accrued by such Employee. Vacation time that is not used during the calendar year is forfeited. Generally, unused Vacation Time is paid to Employees only upon termination or death. Prior to the Commencement Date, the Debtors paid approximately $275,000 per month in respect of Vacation Time. The Debtors estimate that, as of the Commencement Date, they owe approximately $580,000 in accrued and unused Vacation Time for the current calendar year. E. Personal/Sick Time - The Employees also accrue other paid time off including personal days and sick time, based on length of service. Employees are paid their full wages for each personal or sick day, up to the maximum amount of Paid Time Off accrued by the Employee. Unused Paid-Time-Off for one calendar year is carried over into the next year up to the maximum allowed amount of Paid Time Off. Unused Paid-Time-Off that exceeds the maximum allowed number is forfeited. Generally, unused Paid- Time-Off is paid to Employees only upon termination or death. Prior to the Commencement Date, the Debtors paid approximately $245,000 per month in Paid-Time-Off benefits. The Debtors estimate that, as of the Commencement Date, they will owe approximately $986,000 in accrued and unpaid Paid-Time-Off benefit for the current calendar year. F. Trust Fund Taxes - The Debtors are required by law to withhold from an Employee's wages and commissions amounts related to federal, state, local income taxes, and social security and Medicare taxes. They must remit these deductions to the appropriate taxing authorities. The Debtors are required to match from the social security and Medicare taxes owed by the Employees from their own funds, and pay, based on a percentage of gross payroll, additional amounts for state and federal unemployment insurance and to remit the Payroll Taxes to the Taxing Authorities on a periodic basis, (generally on a bi-weekly basis). On March 21, 2002, the Debtors paid approximately $1,057,000 in Payroll Taxes as related to Payroll Obligations, Commission Obligations, Vacation Obligations, and Paid Time Off Obligations, which represents the Debtors' total estimated Payroll Taxes for the period March 9, 2002 through March 22, 2002. The Debtors estimate that, as of the Commencement Date, approximately $710,000 will be owed for accrued and unpaid Payroll Taxes relating to the Payroll Obligations, Commission Obligations, Vacation Obligations, and Paid Time Off Obligations for the period after March 21, 2002. Employee Benefits In the ordinary course of their businesses, as is customary with most large companies, the Debtors have established various plans and policies that provide Employees with benefits including, health insurance, dental insurance, life insurance, death and dismemberment coverage, vision care, short-term and long-term disability, 401 (k) plans, and other similar benefits. A. Health Insurance - The health insurance plan is a self-insured plan that offers comprehensive medical coverage to Employees at little or no cost to the Employees, which includes both a prescription drug and vision care program. The Debtors estimate that the annual cost per employee for the plan is $4,819, and, based upon the number of Employees currently covered by the plan, the monthly cost to maintain the health insurance plan is approximately $690,000. The Debtors also offer Employees in certain offices the option of an HMO plan. Employees who choose the HMO plan are provided with a company paid credit. Any premiums in excess of the preset credit are withheld from the Employee's wages. The Debtors estimate that their monthly cost to maintain the HMO plans is approximately $17,600. The Employee dental plan, administered by Metlife Dental, is entirely self-funded by the Employees through full-premium deductions in their biweekly salary. To the extent that the Debtors have deducted any amounts from Employee wages related to the dental plan that have not been remitted to Metlife Dental, the Debtors are seeking authority to pay such obligations in the ordinary course of their businesses. The Debtors also provide short-term and long-term disability insurance for their Employees. Pursuant to this program, the Debtors pay all of the premiums including an estimated monthly cost of $34,000 for the short-term disability insurance and an estimated $16,000 per month for the long-term disability insurance. B. Life Insurance/Accidental Death Coverage - The Debtors also provide basic life, voluntary life, accidental death, and travel/accident insurance for all full time employees. The life insurance coverage for each Employee is equal to such Employee's annual salary, up to a maximum of $50,000. In addition to the basic life insurance coverage, the Debtors offer a voluntary life insurance program to all Employees working a minimum of 20 hours per week. Premiums for this voluntary life insurance program are paid by the Employee through deductions in the Employee's bi-weekly salary, and each Employee may elect coverage for him or herself, the Employee's spouse, and any children. Coverage limits under this voluntary program are $500,000 for the Employee and spouse and $10,000 for each child. Travel/accident coverage ranges from $25,000 to $100,000, depending upon the Employee's position within the Debtors' corporate hierarchy. The Debtors estimate that the monthly cost to them to provide basic life and travel/accident insurance to all of their Employees is approximately $7,100. C. 401(k) Plans - Each of the Debtors withholds from the wages of participating Employees contributions toward 401(k) savings plans. The 401(k) Plans allow Employees to defer 2% to 16% of their compensation. The Debtors estimate that as of the Commencement Date, all amounts collected relating to contributions to the 401(k) Plans have been remitted. In addition, pursuant to the 401(k) Plans, the Debtors match 50% of the first 3% of Employee contributions up to a maximum of $750 per employee per year. The Debtors' average bi-weekly 401(k) Plan Contributions are approximately $30,000. The Debtors estimate that, as of the Commencement Date, there are no accrued and unremmitted amounts relating to 401(k) Plan Contributions. D. Aggregate Employee Benefit Costs - The Debtors estimate that their aggregate annual expenditure with respect to the aforementioned Employee Benefit Plans is approximately $9,500,000. Because of the manner in which expenses are incurred and claims are processed under the Employee Benefit Plans, it is difficult for the Debtors to determine the accrued obligations outstanding at any particular time. Based upon the description of the Debtors' obligations arising from the Employee Benefits, the Debtors estimate that, as of the Commencement Date, the obligations that have accrued but have not been paid to or on behalf of Employees under the Employee Benefit Plans are approximately $950,000. Reimbursable Business Expenses Ms. Liu tells the Court that the Debtors customarily reimburse Employees who incur business expenses in the ordinary course of performing their duties on behalf of the Debtors. Such reimbursement obligations include, among other things, travel and entertainment expenses incurred by the Employees through the use of their personal funds or credit cards. On an average, the Debtors reimburse approximately $232,000 per month to Employees in respect of Reimbursement Obligations. Because Employees do not always submit claims for reimbursement promptly, Ms. Liu submits that it is difficult for the Debtors to determine the exact amount of Reimbursement Obligations outstanding at any particular time. Nevertheless, the Debtors estimate that, as of the Commencement Date, the Reimbursement Obligations to be paid to Employees aggregate approximately $116,000. The Debtors also maintain a discretionary tuition reimbursement plan designed to encourage employees to continue their formal education. Pursuant to the Tuition Program, and at the sole discretion of the Debtors, Ms. Liu states that eligible Employees are reimbursed, up to $750 per year to be used towards tuition and career-related certified courses. It is difficult for the Debtors to determine the exact amount of Tuition Expenses outstanding at any particular time because benefits under the Tuition Program are approved by managers in each of the Debtors' entities and only submitted for payment after the successful completion of approved classes. Prior to the Commencement Date, the Debtors paid approximately $3,500 per month in respect of Tuition Expenses. As a national enterprise, Ms. Liu recounts that the Debtors often request Employees to relocate on a temporary or permanent basis to other offices in accordance with the requirements of the Debtors' businesses. Employees, including new hires, who relocate at the Debtors' request are reimbursed for various out-of-pocket expenses, including moving and transportation costs. Prior to the Commencement Date, the Debtors paid approximately $21,000 per month in respect of the Relocation Expenses. Administration of Employee Benefit Plans As is customary with most large companies, in the ordinary course of their businesses, Ms. Liu informs the Court that the Debtors utilize the services of outside agents in order to facilitate the administration and maintenance of their books and records in respect of the Debtors' Employee Benefits. The Debtors utilize the services of Highmark Service BCBS to administer their Employee health related benefit plans, Kingsbridge Service to administer their 401(k) Plan, and a third party administrator, P5 E. Health Service, to administer the life, dental and HMO plans. The average monthly fee payable to Highmark Service BCBS is approximately $65,000, the average monthly fee payable to Kingsbridge Service is approximately $2,600, while there is no monthly fee payable to P5 Health Service for administration services. The Debtors estimate that as of the Commencement Date, there are no accrued and unpaid Benefit Administration Obligations. ----------------------------------------------------------------- [00020] DEBTORS' MOTION TO CONTINUE CURRENT INVESTMENT POLICY ----------------------------------------------------------------- According to Harvey R. Miller, Esq., at Weil Gotshal & Manges LLP in New York, prior to the Commencement Date, the Debtors generally invested all excess cash in money market accounts maintained with Merrill Lynch and Salomon Smith Barney. Historically, Merrill and Salomon would invest the Debtors' cash in low-risk investments including high-grade commercial paper and short-term treasuries. The Debtors seek entry of an order authorizing the Debtors to continue investing their cash in accordance with the Investment Guidelines, and, to the extent necessary, obtain a waiver of Section 345(b) of the Bankruptcy Code. Mr. Miller notes that Section 345(a) of the Bankruptcy Code authorizes deposits or investments of money as "will yield the maximum reasonable net return on such money, taking into account the safety of such deposit or investment." Section 345(b) of the Bankruptcy Code provides special requirements for deposits or investments that are not "insured or guaranteed by the United States or by a department, agency, or instrumentality of the United States, or backed by the full faith and credit of the United States." Section 345(b) of the Bankruptcy Code provides that the estate require from the entity with which the money is deposited or invested, a bond in favor of the United States and secured by the undertaking of an adequate corporate surety, unless the Court for cause orders otherwise. In the alternative, the estate may require the entity to deposit governmental securities pursuant to 31 U.S.C. Sec. 9303. Mr. Miller contends that investment of cash in strict compliance with the requirements of Section 345(b) is, in large cases such as this, inconsistent with Section 345(a) of the Bankruptcy Code. Section 345(a) of the Bankruptcy Code permits a trustee or Debtor In Possession to make such investments of money of the estate "as will yield the maximum reasonable net return on such money." The Debtors believe that their current investments, all of which are in accordance with the Investment Guidelines, provide the protection contemplated by Section 345(b) of the Bankruptcy Code. As to investments in securities of private entities, Mr. Miller believes that any corporate surety that might be obtained to guarantee the safety of an investment might not be significantly stronger than the private entities in which the Debtors ordinarily invest under the Investment Guidelines. Finally, a bond secured by a corporate surety is prohibitively expensive, if such bond is available at all, and might offset much of the financial gain derived from investing in private as well as federal or federally guaranteed securities. * * * Judge Gerber grants the relief requested on an interim basis subject to a final hearing on April 16, 2002 if any objections are filed by April 10, 2002. If no objections are presented, this interim order becomes a final order. ----------------------------------------------------------------- [00021] DEBTORS' MOTION TO CONTINUE WORKERS' COMPENSATION PROGRAM ----------------------------------------------------------------- The Debtors obtained authorization to continue the Workers' Compensation Programs and to maintain the Liability and Property Programs on an uninterrupted basis, consistent with prepetition practices. The Debtors are authorized to pay, when due, all pre- petition premiums, administrative fees, and other related pre- petition obligations to either Adelphia Communications Corporation, the Insurance Companies, or any relevant state agencies to the extent due and payable post-petition. Additionally, when due and payable, the Debtors are authorized to make premium payments and to pay other administrative costs of the Workers' Compensation Programs and the Liability and Property Programs relating to a period prior to the Commencement Date. In April 1998, according to Judy G.Z. Liu, Esq., at Weil Gotshal & Manges LLP in New York, Adelphia Communications Corporation and the Debtors entered into a Management Services Agreement. Pursuant to this agreement, Adelphia Communications agreed to provide certain services and resources considered necessary for the operation and management of the Debtors' business, including the provision of insurance coverage for Debtors' under the Insurance Programs. The Debtors maintain insurance coverage as a "named insured" under various workers' compensation and general liability and property insurance policies issued by several different insurance carriers. The Insurance Programs include coverage for claims involving, workers' compensation, automobile, aircraft, commercial general liability, directors' and officers' liability, and excess and umbrella liability. In exchange for obtaining coverage under the Insurance Programs, the Debtors reimburse Adelphia Communications for the Debtors' share of the premiums and deductibles related to the Insurance Programs. This is based on a pro rata allocation of costs paid by the Debtors under the Insurance Programs. Ms. Liu relates that under the laws of the various states in which they operate, the Debtors are required to maintain workers' compensation policies and programs to provide their employees with workers' compensation coverage for claims arising from or related to their employment with the Debtors. With the exception of Ohio, Washington, West Virginia, and Puerto Rico, the Debtors maintain workers' compensation policies with Royal Indemnity Company in all of the states in which they operate. Applicable law in Ohio, Washington, West Virginia, and Puerto Rico mandates that companies doing business within those states or territories must acquire workers' compensation coverage exclusively through the government administered program. Accordingly, in Ohio, Washington, West Virginia, and Puerto Rico, the Debtors maintain workers' compensation coverage under the government-administered programs. Ms. Liu explains that the premiums for the Workers' Compensation Programs are paid monthly and are based on a fixed percentage of the Debtors' estimated annual payroll. The Debtors' average monthly premiums with respect to the Workers' Compensation Programs are approximately $200,000 in the aggregate, which are based upon a percentage of the Debtors' annual payroll. Following an annual audit of Adelphia Communication and Debtors' payroll, the named insured entities either pay an additional premium owed or receive refunds for overpayments previously made. Based upon an audit of Adelphia Communication and Debtors' payroll, Ms. Liu submits that Adelphia Communication and Debtors have been notified that approximately $2,400,000 will be charged in 2002 for underpayments on premiums for the policy year May 16, 1999 to May 16, 2000, of which the Debtors are responsible for approximately $380,000 of this underpayment. Ms. Liu tells the Court that the Debtors also maintain various general liability and property insurance policies, which provide the Debtors with primary, umbrella, and excess insurance coverage for claims relating to commercial general liability, automobile liability, directors' and officers' liability, and property damage, which are essential to the ongoing operation of the Debtors' businesses. Similar to the Workers' Compensation programs, the general liability and auto policies are subject to the terms of the MSA, and, thus, all payments to the Insurance Carriers are made by Adelphia Communications. Thereafter, the Debtors are obligated to reimburse the Debtors for the costs and expenses attributable to the Debtors. Ms. Liu states that the general liability and auto policies were issued by Royal Insurance Co., the average monthly premiums for which are approximately $65,000 and $45,000, respectively. The property and umbrella policies are issued by Royal Indemnity and Liberty Mutual. These are financed through A.I. Credit Corporation, which pays the entire annual premium up-front, and then bills Adelphia Communications on a monthly basis. Adelphia Communications pays the entire monthly premium amount and the Debtors, pursuant to the MSA, are obligated to reimburse Adelphia Communications for their share of the premium. Ms. Liu submits that the average monthly premiums for the Debtors' property and umbrella coverage are approximately $20,000 and $15,000, respectively. The Debtors are required to reimburse Adelphia Communications for the deductible related to each claim arising under the auto policies, which is paid on a per claim basis. Under the automobile policies, Ms. Liu notes that the Insurance Companies pay the full amount of each settlement, and then charge Adelphia Communications for the settlement amount up to the applicable deductible. The deductible under the auto insurance policies is approximately $500 per claim and the Debtors pay approximately $1,600 per month for deductibles under the automobile policies. The deductible for claims under the Property Programs varies according to the damage in an event. In the event of a property loss, Adelphia Communications pays the full amount necessary to correct the damage, and then submits a claim to the insurance carrier. If uncontested, the carrier then pays Adelphia Communications the amount of the claim minus the deductible, and the Debtors would then reimburse Adelphia Communications for the deductible. Ms. Liu contends that it is essential to the continued operation of the Debtors' businesses and their efforts to reorganize that the Insurance Programs be maintained on an ongoing and uninterrupted basis. The Debtors are obligated to reimburse Adelphia Communications for all costs attributable to the Debtors under the Insurance Policies, without which, Adelphia Communications can terminate the Debtors' coverage under the Insurance Programs. If the Insurance Policies are allowed to lapse, the Debtors might be exposed to substantial liability for damages resulting to third parties or property of the Debtors and others. Ms. Liu claims that continued effectiveness of the directors' and officers' liability policies is necessary to the retention of qualified and dedicated Senior management. Furthermore, pursuant to the terms of many of their leases, as well as the guidelines established by the United States Trustee, the Debtors are obligated to remain current with respect to certain of their primary insurance policies. Ms. Liu argues that the maintenance of the Workers' Compensation Programs is indisputably justified, as applicable state law mandates this coverage. Furthermore, with respect to the Workers' Compensation Claims, the risk that eligible claimants will not receive timely payments with respect to employment-related injuries could have a devastating effect on the financial well- being and morale of the Debtors' employees, and their willingness to remain in the Debtors' employ. Departures by employees at this critical time may result in a severe disruption of the Debtors' businesses to the detriment of all parties in interest. A significant deterioration in employee morale undoubtedly will have a substantially adverse impact on the Debtors, the value of their assets and businesses, and their ability to reorganize. Ms. Liu asserts that the amounts the Debtors pay to maintain the Insurance Programs are minimal in light of the size of the Debtors' estates, and the potential negative exposure of the Debtors if such insurance coverage were absent. ----------------------------------------------------------------- [00022] DEBTORS' MOTION TO DETERMINE UTILITIES ADEQUATELY ASSURED ----------------------------------------------------------------- Harvey R. Miller, Esq., at Weil Gotshal & Manges LLP in New York, relates that in connection with the operation of their businesses and management of their properties, the Debtors obtain electricity, telephone, telecommunication, and similar services from many different utility companies and telecommunication vendors throughout the United States. Pursuant to Section 366 of the Bankruptcy Code, for the 20-day period after the commencement of a bankruptcy case, a utility is not allowed to discontinue service to a debtor solely because a the bankruptcy case has commenced or because of the failure of the debtor to pay a pre-petition debt. Following the 20-day period, however, Mr. Miller fears that utilities may discontinue service to the debtor if the debtor does not provide adequate assurance of future performance of its post-petition obligations. If the Utility Companies are permitted to terminate Utility Services on the 21st day after the Commencement Date, the Debtors will be forced to cease operation of their facilities, resulting in a substantial loss of revenues and causing irreparable harm to the Debtors' business. Mr. Miller believes that cessation of key utility services directly impacts the Debtors' ability to provide services to their customers, and jeopardizes the very core of the Debtors' restructuring efforts. It is therefore critical that Utility Services continue uninterrupted. The Debtors seek immediate issuance of an order: A. determining that the Utility Companies have been provided with adequate assurance of future performance, and may not alter, refuse, or discontinue any Utility Service, B. determining that the Debtors are not required to provide the Utility Companies with additional deposits or security, and C. establishing procedures for determining requests by Utility Companies for additional assurances of future performance beyond those proposed in this Motion. The Debtors submit that the Utility Companies have been provided with adequate assurance of the Debtors' future performance of their post-petition obligations, given that the Debtors agree to pay for Utility Services rendered to the Debtors following the Commencement Date. Payment is part of an administrative expense of their Chapter 11 estates for Utility Services rendered to the Debtors. The Debtors request that the Court issue an order establishing the following procedures for determining requests by Utility Companies for additional assurances of future performance in the event such Utility Companies demand assurances beyond those set forth in this Motion. Mr. Miller informs the Court that the Debtors will serve such order by first-class mail within 5 business days of its entry on all of the Utility Companies. The order will provide that any Utility Company may request in writing, within 25 days of the date that the order is entered, additional assurances of payment in the form of deposits or other security. In the event that a Utility Company makes a timely request for additional assurance that the Debtors believe is unreasonable, the Debtors may file a Motion for Determination of Adequate Assurance of Performance and set such motion for a hearing. Any Utility Company requesting additional assurance is prohibited from discontinuing, altering, or refusing service to the Debtors. They are deemed to have adequate assurance of payment unless the Court issues a final order to the contrary. Mr. Miller submits that the Debtors have an excellent pre- petition payment history with the Utility Companies. To the best of the Debtors' knowledge, there are no significant defaults or arrearages with respect to undisputed Utility Service invoices, other than payment interruptions caused by the preparation for and commencement of these Chapter 11 cases. In addition, the Debtors represent that they will continue to pay all undisputed post-petition obligations, including utility bills, as billed and when due. Moreover, Mr. Miller points out that the Debtors have obtained interim post-petition financing in the aggregate amount of $125,000,000, which should constitute adequate assurance for the Utility Companies of the Debtors' timely future payments of its obligations. The adequate assurance proposed, which includes explicitly granting administrative expense priority to any postpetition utility obligations, will provide more than sufficient protection to the Utility Companies. Further, Mr. Miller adds that the relief requested ensures that the Debtors' business operations will not be disrupted and also provides the Utility Companies with a fair and orderly procedure for determining requests for additional adequate assurance. ----------------------------------------------------------------- [00023] ABIZ WON'T FILE 2001 ANNUAL REPORT ON TIME ----------------------------------------------------------------- Adelphia Business Solutions, Inc., tells the Securities and Exchange Commission that it won't be able to timely file its annual report on Form 10-K for 2001. Preparing for the chapter 11 filing and negotiating the terms of a potential reorganization plan took priority, ABIZ Vice President John B. Glicksman, explains. ABIZ advised that results for the fiscal year ended December 31, 2001 are anticipated to decline on a basis comparable to the fiscal year ended December 31, 2000. The Company currently estimates that net loss applicable to common stockholders will increase from approximately $330,528,000 to approximately $1,583,035,000 for the fiscal years ended December 31, 2000 and 2001, respectively. The decline in the financial performance is primarily due to an approximate $1,152,656,000 impairment write- down of long-lived assets. *** End of Issue No. 2 *** ------------------------------------------------------------------------- Peter A. Chapman peter@bankrupt.com http://bankrupt.com ------------------------------------------------------------------------- Recommended Reading: Professor Stuart Gilson's newest title, "Creating Value Through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups." List Price: $79.95 -- Discounted to $55.96 at http://amazon.com/exec/obidos/ASIN/0471405590/internetbankrupt -------------------------------------------------------------------------