================================================================= ADELPHIA BANKRUPTCY NEWS Issue Number 7 ----------------------------------------------------------------- Copyright 2002 (ISSN XXXX-XXXX) June 11, 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. New issues are prepared by Danilo R. Munoz, Jr., Vince Brandt and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of ADELPHIA BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00052] CENTURY COMMUNICATIONS FILES CHAPTER 11 PETITION [00053] CENTURY COMMUNICATIONS' CHAPTER 11 DATABASE [00054] U.S. TRUSTEE APPOINTS ABIZ UNSECURED CREDITORS' COMMITTEE [00055] ABIZ'S SECOND MOTION FOR MORE TIME TO FILE SCHEDULES [00056] ABIZ'S MOTION TO APPROVE AGREEMENT TO RESHUFFLE BOARD [00057] DEBTORS' MOTION TO REPLACE BOND WITH LETTER OF CREDIT [00058] ABIZ COMMITTEE'S APPLICATION TO EMPLOY E&Y AS TAX ADVISOR [00059] COMMITTEE'S APPLICATION TO HIRE EYCF AS FINANCIAL ADVISOR [00060] ABIZ CLARIFIES TERMS OF SALE OF TSR LINES TO BELLSOUTH [00061] CUMBERLAND'S MOTION TO COMPEL DECISION ON AGREEMENTS [00062] LUCENT'S MOTION FOR RELIEF FROM STAY TO SELL EQUIPMENT [00063] ABIZ'S MONTHLY OPERATING REPORT - April 30, 2002 [00064] ABIZ COMPLETES 1,000 MILES OF FIBER OPTICS CONTRACT KEY DATE CALENDAR ----------------- 03/27/02 ABIZ's Voluntary Petition Date 06/10/02 CENTURY's Voluntary Petition Date 06/20/02 ABIZ Deadline to file Schedules of Assets & Liabilities 06/20/02 ABIZ Deadline to file Statement of Financial Affairs 06/20/02 ABIZ Deadline to file Lists of Leases and Contracts 06/25/02 CENTURY Deadline to file Schedules of Assets & Debts 06/25/02 CENTURY Deadline to file Statement of Financial Affairs 06/25/02 CENTURY Deadline to file Lists of Leases and Contracts 06/25/02 ABIZ Deadline to remove actions pursuant to Rule 9027 07/25/02 Expiration of ABIZ's Exclusive Plan Proposal Period 09/08/02 CENTURY Deadline to remove actions pursuant to Rule 9027 09/23/02 Expiration of ABIZ's Exclusive Solicitation Period 10/08/02 Expiration of CENTURY's Exclusive Plan Proposal Period 12/07/02 Expiration of CENTURY's Exclusive Solicitation Period 03/26/04 Deadline for ABIZ's Commencement of Avoidance Actions 03/26/04 Expiration of ACC-Backed DIP Financing Facility for ABIZ 06/09/04 Deadline for CENTURY's Commencement of Avoidance Actions Deadline to make decisions about ABIZ lease dispositions Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 USC Sec. 341 REFERENCE NOTES --------------- "ABIZ" and "Adelphia Business" refer to Adelphia Business Solutions, Inc., and its debtor-affiliates that filed chapter 11 petitions on March 27, 2002. These debtors' restructurings are jointly administered under case number 02-11388 and these debtors are represented by lawyers at Weil, Gotshal & Manges. ABIZ is a 2001 spin-out from Adelphia Communications Corporation. "CENTURY" and "Century Communications" refer to Century Communications Corporation. Century filed for chapter 11 protection on June 10, 2002. Case number 02-12834 is assigned to CENTURY's bankruptcy case. Century operates cable television services in Colorado, California and Puerto Rico. CENTURY says it is an indirect wholly owned subsidiary of ACOM and an ABIZ affiliate. Lawyers at Willkie, Farr & Gallagher represent CENTURY. "ACOM" and "Adelphia Communications" refer to Adelphia Communications Corporation (OTC: ADELA). To date, ACOM has not sought chapter 11 protection. "Adelphia" collectively refers to ABIZ and ACOM. "Debtors" collectively refers to ABIZ, CENTURY and ACOM. ----------------------------------------------------------------- [00052] CENTURY COMMUNICATIONS FILES CHAPTER 11 PETITION ----------------------------------------------------------------- COUDERSPORT, Pennsylvania -- June 10, 2002 -- Century Communications Corporation ("Century"), an indirect, wholly-owned subsidiary of Adelphia Communications Corporation (OTC: ADELA), filed a voluntary petition for relief today under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. The bankruptcy filing was made to protect Century's fifty percent interest in Century-ML Cable Venture (the "Joint Venture"), a joint venture that owns and operates cable television systems serving the cities of San Juan, Levittown, Toa Alta, Catano and Toa Bajo, Puerto Rico, against attempts by ML Media Partners, L.P. ("ML") to foreclose on Century's fifty percent interest in the Joint Venture. ML, the other fifty percent partner in the Joint Venture, has notified Century that it intends at the start of business Tuesday, June 11, 2002 to seize management control of the Joint Venture and foreclose on Century's fifty percent interest in the Joint Venture unless the Joint Venture or Adelphia completed the purchase of ML's 50% interest in the Joint Venture for $275 million by the close of business on Monday, June 10. In response to ML's threatened foreclosure, Century sought, but was not able to obtain, a temporary restraining order in the Supreme Court of the State of New York that would have prevented ML from foreclosing on Century's 50% interest in the Joint Venture and seizing management control. The Chapter 11 bankruptcy filing was made following the failure to obtain the temporary restraining order on Monday afternoon. Adelphia Chairman and interim CEO Erland Kailbourne said, "We had hoped that we would not have to seek bankruptcy protection for Century and we took every reasonable step to resolve the situation without a filing. With all the critical issues facing this Company, I'm deeply disappointed in ML's action, which we believe would likely impair these valuable assets and could prejudice other stakeholders. Despite our continuous, good faith efforts to reach an agreement with ML, it has taken actions that left Century with no other choice but to seek the protection of the bankruptcy court to avoid the wrongful seizure of a valuable asset. "I want to assure Adelphia's employees and customers in Puerto Rico that the bankruptcy filing will not interfere with the Company's continued ability to serve them. I'd also like to thank our employees and customers in Puerto Rico for their continued loyalty and assure them that under the protection of the bankruptcy court, we will continue to provide the high quality, reliable service that they are accustomed to." ----------------------------------------------------------------- [00053] CENTURY COMMUNICATIONS' CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor: Century Communications Corporation One North Main Street Coudersport, Pennsylvania 16915 Bankruptcy Case No.: 02-12834 Type of Business: Century Communications Corporation, is an affiliate of Adelphia Business Solutions, Inc., and an indirect wholly owned subsidiary of Adelphia Communications Corp. ACOM acquired Century in 1999 in a $5.2 bilion transaction, making ACOM the fifth largest operator of cable television systems in the United States at that time, and serving 4.7 million subscribers concentrated in Colorado, California and Puerto Rico. Chapter 11 Petition Date: June 10, 2002 Court: Southern District of New York (Manhattan) Debtors' Counsel: Myron Trepper, Esq. Marc Abrams, Esq. Shelley C. Chapman, Esq. Willkie Farr & Gallagher 787 Seventh Avenue New York, New York 10019-6099 Telephone (212) 728-8000 Fax (212) 728-8111 Estimated Assets: More than $100 Million Estimated Debts: More than $100 Million ----------------------------------------------------------------- [00054] U.S. TRUSTEE APPOINTS ABIZ UNSECURED CREDITORS' COMMITTEE ----------------------------------------------------------------- See prior entries at [00035], [00029] and [00024]. The United States Trustee for Region II amends the appointment of the ABIZ Official Committee of Unsecured Creditors for the second time by removing The Bank of New York from the Committee and reinstated Fidelity Management & Research Co. The U.S. Trustee also expanded the Committee to six members by adding HSBC Bank USA. The ABIZ Creditors' Committee now consists of: A. Bell South Corporation 1155 Peachtree St., Suite 1929, Atlanta, GA 30309-3610 Attn: Bradley O. Greene, Exec. Dir. - Corp. Development Phone: (404) 249-4506 Fax: {404} 249-4740 B. Fidelity Management & Research Co. 82 Devonshire St., E20E, Boston, MA 02109 Attn: Nate VanDuzer Phone: (617) 392-8129 Fax: (617) 476-5174 C. HSBC Bank USA 452 Fifth Ave., New York, New York 10018 Attn: Issuer Services D. Bank of America 901 Main St., Dallas, Texas 75202 Attn: Robin Phelan Phone: (214) 209-0966 Fax: (214) 290-9490 E. Fujitsu Network Communications Inc. 2801 Telecom Parkway, Richardson, TX 75082 Attn: Charles R. Owen, Assistant General Counsel Phone: (972) 479-3713 Fax: (972) 479-2992 F. Wilmington Trust Co. Rodny Square North, 1100 Malat St., Wilmington, DE 19801 Attn: Michael Diaz Phone: (302) 656-8326 Fax: (302) 636-4140 ----------------------------------------------------------------- [00055] ABIZ'S SECOND MOTION FOR MORE TIME TO FILE SCHEDULES ----------------------------------------------------------------- ABIZ requests a further extension of time within which to prepare and file their Schedules -- through and including July 25, 2002. According to Judy G.Z. Liu, Esq., at Weil Gotshal & Manges LLP in New York, New York, the ABIZ Debtors provide telecommunications services nationwide to thousands of direct customers. ABIZ also provides services to other companies who in-turn provide the ABIZ Debtors' services to their direct customers. These services are governed by a multitude of agreements affecting a myriad of assets and equipment, in different regional locations. The process of identifying all such executory contracts and leases, and all potential claimants is a formidable one, but necessary to ensure that all creditors are notified of important developments in ABIZ's chapter 11 cases. In order to prepare the Schedules, Ms. Liu submits that ABIZ has sought to gather extensive information on all such services and clients throughout the country. Such a task has required an enormous expenditure of time and effort on the part of the Debtors and their employees. Since the Commencement Date, Ms. Liu avers that ABIZ's management has expended substantial efforts responding to the many exigencies and other matters that are incident to the commencement of any chapter 11 case, but which are compounded by the size and complexity of these cases. ABIZ has had to, among other things: * stabilize its businesses, * reformulate its business plan, * expend substantial time and resources to identify and negotiate extensively with potential post-petition lenders, * respond to requests for adequate assurance pursuant to section 366 of the Bankruptcy Code, * respond to motions seeking to compel it to assume or reject executory contracts, * identify for sale assets that are no longer economically beneficial to the estates, * identify leases for rejection to conserve administrative costs, * maintain current services necessary to the operation of its businesses, * conduct meetings with numerous vendors with respect to continuing prepetition business relationships, and * meet with the major creditor constituencies in these cases to keep them apprised of major developments. Moreover, the Debtors' ability to confront the various exigencies incidental to their chapter 11 cases has been adversely affected as a result of a significant workforce reduction since the Commencement Date, which has been necessitated by the Debtors' revised business plan. The loyal employees who remain have had to shoulder the extra demands of the chapter 11 process and a streamlined workforce, and are working tirelessly to meet all of the requirements imposed by the chapter 11 process to the best of their abilities. Accordingly, in view of the size of the Debtors' cases, the amount of information that must be assembled and compiled, the location of such information, and the significant amount of employee time that must be devoted to the task of completing the Schedules, the Debtors submit that ample cause exists for an extension of an additional 45 days to file their Schedules, through and including July 25, 2002. A hearing on the motion is scheduled on June 20, 2002. ----------------------------------------------------------------- [00056] ABIZ'S MOTION TO APPROVE AGREEMENT TO RESHUFFLE BOARD ----------------------------------------------------------------- By this Motion, ABIZ seeks entry of an order approving a Settlement Agreement negotiated between the independent directors currently serving on ABIZ's Board of Directors and certain members of the Rigas family: -- John J. Rigas, Chairman and Director of ABIZ; -- James P. Rigas, Vice Chairman, Chief Executive Officer, President, and Director of ABIZ; -- Michael J. Rigas, Vice Chairman, Secretary, and Director of ABIZ; and -- Timothy J. Rigas, Vice Chairman, Chief Financial Officer, Treasurer, and Director of ABIZ. Harvey R. Miller, Esq., at Weil Gotshal & Manges LLP in New York, New York, informs the Court that the disputes that precipitated the Settlement Agreement arose largely as a result of public disclosures by the Debtors' former parent, Adelphia Communications Corporation, which the Rigas Family controlled and operated until they resigned on May 23, 2002 from ACOM's board and relinquished their executive positions. The ABIZ Independent Board Committee was deeply concerned that the ongoing investigations of the Rigas Family's relationship with and stewardship of ACOM would increasingly distract the Rigas Family from performing their duties at ABIZ and divert their attention to such an extent that their ability to execute daily operating decisions and participate in board meetings on a regular basis would be adversely affected. Mr. Miller relates that the Rigas Family and the Independent Committee held frank discussions over the course of several days to address these concerns. These meetings culminated in the Settlement Agreement, which, among other things, provides for the Rigas Family's resignation of their ABIZ board seats and executive positions in the interest of ensuring that the Debtors' restructuring efforts proceed without the impediments caused by the adverse publicity surrounding the Rigas Family's relationship with ACOM. The salient terms of the Settlement Agreement are as follows: * Resignations: Each member of the Rigas Family has agreed to resign (effective upon entry of the Approved Order) as officers and directors of ABIZ, and any direct or indirect subsidiaries of ABIZ. * Representations and Undertakings: Pursuant to section 218(c) of the Delaware General Corporation Law, the Rigas Family has irrevocably agreed, for a period of no less than three years or until the confirmation of a plan of reorganization in ABIZ's chapter 11 case, whichever is earlier, to vote all of their shares, or any shares owned by an entity that is directly or indirectly owned or controlled by the Rigas Family, of ABIZ common stock at the direction of the Board of Directors with respect to the election or removal of a director of ABIZ. To this end, the Rigas Family has further agreed to grant a power of attorney and proxy, coupled with an interest, to the Board of Directors now in place to vote such shares or to execute any written consents as to such matters. * Payment: ABIZ agrees to make a lump sum severance payment of $350,000 to James J. Rigas at the time of the resignations of all Rigas Family members as directors of ABIZ and upon entry of the Approval Order. * Directors and Officers Insurance: ABIZ agrees to provide the Rigas Family with the same coverage under its directors and officers insurance policies as that provided to the other directors and officers of ABIZ. * Reduction in the Size of the Board: The size of the current Board of Directors of ABIZ will be reduced to three seats from eight. The Debtors believe the terms of the Settlement Agreement are fair and equitable, and fall within the range of reasonableness. Approval of the Settlement Agreement is in the paramount interests of ABIZ's creditors. Mr. Miller relates that the parties have headed off potentially bitter and protracted litigation that surely would have led to a stalemate in the Board's ability to govern ABIZ's affairs. Notably, a potential commitment from a replacement postpetition lender is conditioned upon the Rigas Family's resignation from the Board and relinquishment of their executive positions. The Rigas Family's departure will enable ABIZ to move forward with its reorganization, unhampered by the distractions generated by the investigations of the Rigas Family at ACC. Mr. Miller submits that the Independent Committee of the ABIZ Board supports the lump sum severance payment proposed to be made to James Rigas, in his capacity as CEO of ABIZ, and as warranted by his many years of service at ABIZ and the cooperation he has demonstrated in agreeing to resign immediately as a director and senior officer of ABIZ. It is imperative that the Settlement Agreement be approved so that ABIZ may proceed with its chapter 11 case under the guidance of the newly reconstituted Board - - Messrs. Patrick Lynch, Edward Mancini and Robert Guth - - having dispensed with any doubts regarding ABIZ's ability to govern its affairs. * * * COUDERSPORT, Pennsylvania -- June 4, 2002 -- Adelphia Business Solutions, Inc. ("ABS") (Pink Sheets: ABIZQ) today announced that, subject to Bankruptcy Court approval (see entry [00057] below), four members of the Rigas Family have agreed to resign as directors of the Company. The agreement provides for the resignation of John J. Rigas as Chairman and a member of the Board of Directors; the resignation of James P. Rigas as Vice Chairman, Chief Executive Officer, President and a member of the Board of Directors; the resignation of Michael J. Rigas as Vice Chairman, Secretary and a member of the Board of Directors; and the resignation of Timothy J. Rigas as Vice Chairman, Chief Financial Officer, Treasurer and a member of the Board of Directors. It is anticipated that the Board of Directors of ABS will hereafter consist of three members, Patrick Lynch, Edward Mancini, both of whom will act as non-executive co-chairman of ABS, and Robert Guth, who has been appointed President and Chief Executive Officer of ABS. Edward Babcock has been appointed as Chief Financial Officer of ABS. In connection with their resignations, the Rigas Family said that although they had not been charged with any wrongdoing by ABS, they were taking this action to enable ABS to pursue its Chapter 11 restructuring without the distractions resulting from the adverse publicity surrounding the Rigas Family's relationships with Adelphia Communications. ----------------------------------------------------------------- [00057] DEBTORS' MOTION TO REPLACE BOND WITH LETTER OF CREDIT ----------------------------------------------------------------- According to Harvey R. Miller, Esq., at Weil Gotshal & Manges LLP in New York, on May 3, 2000, Adelphia Business Solutions of Pennsylvania, Inc., an indirect non-debtor ABIZ subsidiary, entered into a Contract to provide certain telecommunication services for the Commonwealth of Pennsylvania. As an inducement to the Commonwealth to enter into the Contract, and to provide assurance to the Commonwealth that ABS Pennsylvania would timely perform its obligations, the Contract required ABS Pennsylvania to: * secure a specific performance bond in the amount of $20,000,000 and * establish an escrow account at a commercial bank in the amount of $75,000,000 pursuant to a mutually acceptable escrow agreement. Pursuant to the terms of the Contract, on June 8, 2000, Mr. Miller relates that ABS Pennsylvania obtained a specific performance bond in the amount of $20 million from The Hanover Insurance Company and the Massachusetts Bay Insurance Company. The Performance Bond secured various obligations of ABS Pennsylvania arising under the Contract but expired, by its own terms, on June 8, 2002. To satisfy the escrow account requirement under the Contract, Mr. Miller adds that ABIZ established an escrow account in the initial amount of $75,000,000 at Wachovia Bank, National Association, f/k/a First Union National Bank pursuant to a written escrow agreement among ABIZ, the Commonwealth and Wachovia. The Escrow Agreement provides Commonwealth with assurance that the progress payments due under the Contract will be timely made. Pursuant to the Escrow Agreement, funds are disbursed to ABIZ on a quarterly basis as reimbursement for progress payments made pursuant to the Contract. Currently, there is approximately $20,000,000 in the Escrow Account. In connection with obligations unrelated to the Contract, Mr. Miller avers that Wachovia has issued, prior to the commencement of these chapter 11 cases, 9 letters of credit for the benefit of various subsidiaries of ABIZ. The Outstanding Letters of Credit were intended to be collateralized by a blocked account held in the name of Adelphia Business Solutions Operations, Inc., one of the above named debtors (and the parent of ABS Pennsylvania), which account currently contains approximately $2,000,000. Mr. Miller claims that the expiration of the Performance Bond constitutes a default under the Contract. Commonwealth is entitled to issue a notice of default and seek termination of the contract while ABS Pennsylvania is entitled to a 30-day cure period after any such notice of default is issued. The Debtors sought to have the Performance Bond renewed and/or to seek a replacement bond issued from another surety acceptable to the Commonwealth. However, based upon the Debtors' current financial condition and the commencement of these chapter 11 cases, the Debtors have been unsuccessful in obtaining an appropriate replacement performance bond. Mr. Miller tells the Court that Commonwealth is aware of the Debtors' efforts to comply with the bonding requirement of the Contract. In a concerted effort to avoid a default under the Contract, Commonwealth has agreed to accept, in lieu of a new performance bond, a letter of credit from a commercial bank in the amount of $20,000,000. To avoid a default under the Contract, the Debtors solicited a proposal from Wachovia to provide for the issuance of a $20,000,000 letter of credit, upon the following conditions: A. that the Letter of Credit is secured by first priority lien on the Escrow Account and B. that Wachovia obtains a first priority lien on the ABS Operations Account as collateral for the Outstanding Letters of Credit. In the event that the Debtors obtain interim Court approval of this arrangement on or before 12:00 p.m. on June 14, 2002, Commonwealth has agreed to forbear from issuing a notice of default under the Contract. In order accomplish the subject transaction, the Debtors propose to execute a number of documents, including: A. an amendment to the Escrow Agreement, B. a guaranty agreement for each of the COPA Letter of Credit and, collectively, the Outstanding Letters of Credit, and C. a pledge agreement for each of the COPA Letter of Credit and, collectively, the Outstanding Letters of Credit. By this Motion, the Debtors seek entry of an order pursuant to Sections 105, 363(b) and 364 of chapter 11 of title 11 of the United States Code authorizing the replacement of the Performance Bond with a cash collateralized letter of credit and the execution of the Transaction Documents. Mr. Miller contends that the Commonwealth Contract is the single most important contract in the Debtors' estates as it generates approximately $50,000,000 in annual revenue and produces approximately $25,000,000 in annual EBITDA. The build-out of infrastructure governed by the Contract is nearly finished - anticipated completion of the infrastructure is scheduled for the end of November or early December 2002. The Contract, and the requirement to provide a performance bond, continue until at least 2005. Failure to complete the infrastructure would be a default under the Contract. Mr. Miller believes that it would be a poor business decision to allow this lucrative contract to terminate at this late stage. In the event that that the Contract was terminated, the Debtors' business plan would be severely affected. The proposal from Wachovia is the only option available to the Debtors for preserving the Contract, especially under the exigent circumstances facing the Debtors -- an expired Performance Bond and an imminent default notice. Moreover, the issuance of a default notice would jeopardize the Debtors pending negotiations with a potential post-petition lender, which would not likely make a lending commitment in the face of an impending default. Mr. Miller contends that the ABS Operations Account is property of the Debtors' estates and it could be argued that ABIZ has a contingent property interest in the Escrow Account as well. Pursuant to the interim order entered on April 1, 2002, ACOM was granted a security interest in and lien upon substantially all of the Debtors' property, arguably including the Escrow Account and the ABSO Account. Nevertheless, because the Debtors have been unable to obtain an unsecured performance bond or an unsecured letter of credit, and because ACC is adequately protected and has consented to the priming, if any, of its liens on the Escrow Account and the ABSO Account, the Debtors may grant first priority security interests in and liens upon the funds in such accounts to Wachovia. Mr. Miller asserts that the terms and conditions upon which Wachovia is willing to issue a cash collateralized letter of credit are fair and reasonable, and were negotiated by the parties in good faith and at arms-length. Accordingly, Wachovia should be accorded the benefits of section 364(e) of the Bankruptcy Code in respect of such arrangements. Pursuant to Bankruptcy Rules 4001(b) and 4001(c), the Debtors request that the Court conduct an expedited preliminary hearing on the Motion on or before noon on June 14, 2002, and enter an interim order authorizing the Debtors: A. to replace the expired Performance Bond with the Letter of Credit, and to pledge the Escrow Account to collateralize such letter of credit, and B. to pledge the ABS Operations Account to collateralize the Outstanding Letters of Credit, pending a final hearing on the Motion. Such relief will enable the Debtors to avoid the immediate and irreparable harm and prejudice to the Debtors' estates and all parties in interest that would result from a termination of the Contract. ----------------------------------------------------------------- [00058] ABIZ COMMITTEE'S APPLICATION TO EMPLOY E&Y AS TAX ADVISOR ----------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in ABIZ's chapter 11 cases sought and obtained authorization from the Court to retain Ernst & Young LLP as its financial advisors to render tax & valuation services in these Chapter 11 cases. The Committee anticipates that E&Y LLP may render the following services in this case: A. Analysis of the Debtors' tax position including potential tax attributes available and the availability of any refund opportunities; B. Performing or reviewing enterprise evaluations in connection with the analysis of the Debtors' financial projections and business plan; C. Performing or reviewing valuations, as appropriate and necessary, of Debtors' corporate assets; D. Attending and advising at meetings with the Committee, its counsel and representatives of the Debtors; and E. Rendering testimony in connection with procedures (A) through (D) above, as required on behalf of the Committee; and F. Providing such other services, as requested by the Committee and agreed by E&Y LLP. Chuck Owen, Chairman of the Committee, informs the Court that E&Y LLP is a firm of independent public accountants as defined under the Code of Professional Conduct of the American Institute of Certified Public Accountants. The Committee has selected E&Y LLP as financial advisors because of the firm's diverse experience and extensive knowledge in the fields of accounting, taxation and valuation. According to Mr. Owen, the Committee needs assistance in collecting, analyzing and presenting accounting, financial and other information in relation to these Chapter 11 cases. E&Y LLP has considerable experience with rendering such services to committees and other parties in numerous Chapter 11 cases. As such, E&Y LLP is well qualified to perform the work required in these cases. Gary Cole, a Partner of the firm of E&Y LLP, assures the Court that the firm does not hold or represent an interest adverse to the estate that would impair E&Y LLP's ability to objectively perform professional services for the Committee and is a "disinterested person" as that term is defined in section 101(14) of the Bankruptcy Code. However, the firm has provided or is currently providing services to these parties-in-interests in matters unrelated to these cases: A. Major Shareholders: Alliance Capital Management L.P., Wellington Management Co. LLP and Fidelity Spartan High Income Fund; B. Secured Lenders: The CIT Group; C. Unsecured Bondholders: Teachers Annuity & Insurance Assoc., Toronto Dominion, and Barclays Bank; D. Unsecured Creditors: Ameritech, AT&T, Bank of America, Bank of New York, BellSouth, Convergent Networks, Deloitte & Touche, Fujitsu, Illuminet, Insight Communications, Intermedia Communications, Keystone Business Machines, Level 3 Communications, MCI Worldcom, Metromedia Fiber Network, Pirelli Cable Corp., Qwest, SNET, Southwestern Bell Telephone, Sprint, TSI, Verizon, and Walker & Associates Inc.; Mr. Cole submits that E&Y LLP has not provided, and will not provide, professional services to the Debtors, any of their creditors, any other parties-in-interest, or any of their respective attorneys or financial advisors with regard to any matter related to the Debtors or these Chapter 11 cases. Subject to this Court's approval and pursuant to the terms and conditions of the Engagement Letter, E&Y LLP intends to charge for the professional services rendered to the Committee in these Chapter 11 cases by reference to hourly rates, which are currently as follows: Consultants, Managing Directors and Principals $550-$650 Directors $475-$545 Vice Presidents $375-$440 Associates $320-$340 Analysts $275 Client Services Associates $140 Mr. Cole adds that E&Y LLP will also seek, in the event that any proceedings or legal actions are brought as a result of E&Y LLP performance of tax and valuation services, E&Y LLP will be able to request reimbursement of actual expenses and fees, as mutually agreed between E&Y LLP and the Committee for any time E&Y LLP may incur in considering or responding to discovery request or participating as a witness or otherwise in any legal, regulatory, or other proceeding. ----------------------------------------------------------------- [00059] COMMITTEE'S APPLICATION TO HIRE EYCF AS FINANCIAL ADVISOR ----------------------------------------------------------------- See prior entry at [00047]. Application approved. ----------------------------------------------------------------- [00060] ABIZ CLARIFIES TERMS OF SALE OF TSR LINES TO BELLSOUTH ----------------------------------------------------------------- See prior related entry at [00044] (Debtors' Motion to Sell Accounts to Bellsouth for $750K). COUDERSPORT, Pennsylvania -- June 4, 2002 -- In a move to continue its corporate restructuring efforts, Adelphia Business Solutions announces it is seeking approval from federal bankruptcy court to sell to BellSouth Telecommunications Inc. approximately 10,000 of its Total Service Resale (TSR) lines in Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina and Tennessee. The proposed sale to BellSouth is of resale customers whose service is currently provided by Adelphia Business Solutions using BellSouth's network and equipment. The sale does not affect customers receiving local or long-distance service through Adelphia Business Solutions-owned lines. If the deal is approved, Adelphia Business Solutions resale customers in BellSouth's nine-state region would be transitioned to BellSouth local and long distance service during a brief period beginning at the end of June, unless the customer switches to another provider before that period. "This action will have no effect on the 4,000 regional customers we service through our own facilities," notes Robert Guth, Adelphia Business Solutions' vice president of business operations. "We remain fervently committed to providing our core customers with our full suite of local and long distance voice, high-speed data and Internet services, and the same level of expert care they have enjoyed with Adelphia Business Solutions over the years." Mr. Guth adds that those on-switch customers represent nearly 93 percent of Adelphia Business Solutions' current delivered base. ----------------------------------------------------------------- [00061] CUMBERLAND'S MOTION TO COMPEL DECISION ON AGREEMENTS ----------------------------------------------------------------- Cumberland Stadium, L.P., Tennessee Football, L.P., Cumberland Promotional Enterprises, L.L.C., and Dream Suites, L.P. moves the Court for entry of an order directing ABIZ to immediately to assume or reject a certain Naming and License Agreement, dated July 8, 1999, and a Cumberland Suite Limited License Agreement that is ancillary to the Naming Agreement. Alternatively, if the Court determines to grant ABIZ additional time in which to make a decision to assume or reject, the Cumberland Parties request that the Court order immediate payment of the amounts due under the Naming Agreement, as and when due, or, in the alternative, that the Cumberland Parties be granted adequate protection with respect to the fair value of the benefits that will be realized by ABIZ. Walter H. Curchack, Esq., at Robinson Silverman Pearce Aronsohn & Berman LLP in New York, New York, informs the Court that Tennessee Football is the owner and holder of the NFL franchise known as the "Tennessee Titans" whose home territory is the greater Nashville, Tennessee area. Cumberland Stadium is the lessee under a Stadium Lease Agreement, dated May 14, 1999, with The Sports Authority of the Metropolitan Government of Nashville and Davidson County, as the lessor. Pursuant to the Stadium Lease, Cumberland leases the professional football stadium located in downtown Nashville, Tennessee, for use by the Titans, as their home playing field, and which is currently known as the "Adelphia Coliseum." Under the Stadium Lease and subject to its terms, Cumberland Stadium has the exclusive right to contract from time to time with any person with respect to the naming rights of the Stadium. On July 8, 1999, Mr. Churchack relates that the Cumberland Parties entered into the Naming Agreement with Hyperion Telecommunications, Inc., now known as Adelphia Business Solutions, Inc., one of the Debtors in these cases. Pursuant to the Naming Agreement, the Cumberland Parties agreed, among other things, that the Stadium would be named the "Adelphia Coliseum." In turn, ABIZ agreed, among other things, to pay an annual Naming Rights fee to Cumberland in the amount of $2,000,000 for each NFL season, commencing with the 1999 NFL season and ending with the 2013 NFL season. The Naming Agreement terminates at the later of 11:59 p.m., on February 14, 2014, or two weeks after the conclusion of the NFL season begun in 2013, unless it is terminated sooner in accordance with the terms of the Naming Agreement. Mr. Churchack accords that the Naming Fee is payable for each football season, in four equal installments, which are due on May 15, August 15, November 15, and February 15, respectively. However, the Debtors failed to pay the installment of $500,000 due May 15, 2002. Such payment is now past due and the Debtors are in post Petition Date default of their obligations under the Naming Agreement. As part of the Naming Agreement, and in furtherance thereof, Mr. Chruchack tells the Court that ABIZ entered into the Suite Agreement, under which ABIZ licenses one of the luxury suites at the Stadium, specifically, the suite known as Mezzanine East 221. The term of the Suite Agreement runs concurrently with the Naming Agreement. The Suite Agreement does not have any existence independent of the Naming Agreement. If the Debtors are to reject the Agreements, any order authorizing such rejection should provide, at a minimum, the following: A. relief from the automatic stay, to the extent required to permit the Cumberland Parties to: * remarket the Naming Rights, the Suite, and the other benefits provided to ABIZ under the Agreements; and * exercise their rights and remedies otherwise available under the Agreements; and B. direction to ABIZ to continue to provide the telecommunications services for 60 days after rejection, so that the Cumberland Parties can make arrangements to obtain such services from another party, without interruption to the Cumberland Parties' businesses. Should the Court determine not to require Debtors to assume or reject the Agreements by June 20, 2002, the Cumberland Parties request that this Court enter an order: A. providing that the Cumberland Parties are not required to perform any of their obligations under the Agreements, unless and until the Debtors makes their 2002 season payment of $2,000,000; B. determining that the Cumberland Parties have an administrative claim with respect to the full value of any benefits received by ABIZ after the Petition Date, including, without limitation, the full amount of the Naming Fee for the 2002 NFL Season; and C. to the extent required, modifying the automatic stay to permit the Cumberland Parties immediately to begin remarketing the Naming Rights, the Suite, and the various other benefits provided under the Agreements in order to permit the Cumberland Parties to recoup the damages resulting from ABIZ's delay in assuming or rejecting the Agreements. Alternatively, the Court should require that Debtors pay to the Cumberland Parties the fair value of the numerous rights and benefits to be realized by Debtors under the Agreements, including, without limitation, the fair market value of the football tickets, the Suite and the radio advertisements that are available to the Debtors under the Agreements. Mr. Chruchack avers that the first Naming Fee installment for the 2002 season of $500,000 was due on May 15, 2002. However, The payment was not made and the Cumberland Parties have good reason to believe that Debtors do not intend to make any subsequent installments. The Cumberland Parties will be unduly prejudiced and will suffer these substantial direct pecuniary damage if the relief requested is not granted: A. The Cumberland Parties will be providing cash and cash equivalents to the Debtors in the next several weeks, including the tickets for and use of the Suite, which has a market value of $125,000, and additional game tickets having a fair market value in excess of $90,000. The Debtors would reap a windfall and be unjustly enriched at the expense of the Cumberland Parties if such tickets are not paid for -- either directly or by virtue of the payments required under the Naming Rights Agreement. B. In order to fulfill their obligations under the Naming Agreement for the 2002 NFL season, the Cumberland Parties must place orders with their various vendors for tickets, programs, schedules, and other merchandise and materials that are to bear Adelphia's name, no later than June 20, 2002. The production of this branded merchandise will require the Cumberland Parties to lay out or commit to payments projected to be in excess of $750,000. If the Naming Agreement is rejected later than June 20, 2002, and before, or during the NFL season, Mr. Churchack contends that the Cumberland Parties would not have time to reorder many of the items, including the tickets, programs and schedules, without ABIZ's name, prior to the 2002 NFL season and will therefore lose any opportunity to mitigate their damages for ABIZ's breaches. Further, although the Cumberland Parties may still be able to reorder some consumable items, such as cups, napkins, letterhead, and the like, they could not do so without incurring a substantial additional expense. Moreover, the time for the Cumberland Parties to remarket the Naming Rights, the Suite, and the other benefits provided ABIZ under the Agreements in time for the 2002 NFL season is running out. Thus, the damage to the Cumberland Parties will be substantial, unavoidable and unduly prejudicial, unless the Court immediately grants the requested relief. The Debtors' very ability to pay what would clearly be an administrative expense is questionable here, as: * the Debtors have announced that they are downsizing their operations; * the Debtors and their affiliates are selling assets to raise cash; * there is concern that the Debtors and their affiliates have not properly accounted for various transactions; and * the Debtors have failed to timely pay their administration expense obligation under the Agreements. Moreover, as of the date of this Motion, Mr. Churchack points out that the Debtors have not obtained entry of an order providing them with the DIP financing they have sought and so obviously need. As time passes, the Debtors prospects appear to be worsening and the Cumberland Parties are becoming less able to mitigate their losses, as the naming rights and related consumables are a wasting asset. The Titans' first preseason game is scheduled for August 10, 2002, and their first regular season home game is scheduled for September 8, 2002. If the Cumberland Parties cannot begin re- marketing the Naming Rights by June 20, 2002, Mr. Churchack fears that the Cumberland Parties will lose any opportunity to re- market such assets for the 2002 NFL season. Once the 2002 NFL season begins, the Cumberland Parties are required under the Agreements to provide additional benefits to ABIZ, including, for example, radio advertisements during each game, the cost of which is approximately $175,000. If ABIZ is permitted to reject the Agreements once the season commences, the Cumberland Parties will have been required to incur some or all of these additional expenses, which likely will not be recoverable. Unless and until ABIZ assumes or rejects the Agreements as proposed by the Cumberland Parties, such entities will be unduly harmed and prejudiced, and will be required to expend funds out of their own pocket, while the Debtors are unjustly enriched. "The Agreements are not ABIZ's primary assets," Mr. Churchack says. "ABIZ' primary business is telecommunications." In contrast, the use of the Stadium is the primary business of certain of the Cumberland Parties and, obviously, is vital to the Titans. To the Debtors, the Naming Rights payments constitute, at most, a fraction of ABIZ' advertising and promotional budget and which are not vital or even necessary to the operation and rehabilitation of Debtors. In fact, such expenses may well constitute an expense Debtors would be well served to avoid, especially as they contract their businesses. Mr. Churchack asserts that the Agreements are not necessary for ABIZ's business or reorganization. Whether ABIZ can or will effectively reorganize does not hinge on whether it retains its Naming Rights on, or its luxury Suite at the Stadium. In fact, it may even be questionable whether it would be sound business judgment for ABIZ to assume the Agreements in light of the annual costs associated with them and ABIZ's financial situation. The Cumberland Parties concede that exclusivity has not terminated for the Debtors. Likewise, Mr. Chruchack admits that the Debtors may not have had time to fully review their financial situation and formulate a plan, although they are contracting their businesses, as set forth in filings made in these cases. However, in light of the certain loss and undue prejudice to the Cumberland Parties if the Debtors fail to act timely, these two factors are not sufficient to permit ABIZ to delay its decision to assume or reject the Agreements. This is particularly true when, as seems to be the case here, the likelihood of a successful reorganization is significantly in doubt. Just as the Cumberland Parties are running out of time to remarket the Naming Rights, resell the Suite, and remarket other benefits for the 2002 NFL season, so too is ABIZ. Thus, Mr. Chruchack concludes that it is unlikely ABIZ could receive any premium from assuming and assigning the Agreements for the 2002 NFL season. Additionally, the Naming Agreement prohibits the stadium name from being changed prior to the end of the 2004 NFL season. Therefore, it is unlikely any potential assignee would pay a premium to Debtors' estates for the right to have the Stadium continue to be called "Adelphia Coliseum" for two more seasons. Mr. Churchack notes that the naming rights market presently is very weak. Additionally, it appears that no steps have been taken to remarket the Debtors' rights under the Agreements, at least since the Petition Date. ----------------------------------------------------------------- [00062] LUCENT'S MOTION FOR RELIEF FROM STAY TO SELL EQUIPMENT ----------------------------------------------------------------- Lucent Technologies Inc. seeks an Order pursuant to Sections 365(d)(1) and (2) of the Bankruptcy Code, granting relief from the automatic stay so that it may sell certain equipment. Joseph Lubertazzi Jr., Esq., at McCarter & English LLP in Newark, New Jersey, tells the Court that ABIZ currently owes Lucent substantial sums of money stemming from the parties' General Agreement executed prepetition and various addenda thereto, as modified by the parties' June 28, 2001 Settlement Agreement. Pursuant to the Contract, Lucent agreed to provide ABIZ telecommunication products, licensed materials and services, in return for ABIZ's agreement to satisfy certain specified purchase commitments - set forth annually from 1999 through 2003 - and to timely pay its invoices. Mr. Lubertazzi states that Lucent's records show that ABIZ is currently in default on millions of dollars of unpaid invoices, including late charges as provided by the Contract. Some of the unpaid invoices, relating to DWDM equipment that is currently being stored in Morrow, Georgia by Lucent, are the subject of dispute between the parties. Lucent acknowledges, but disputes, ABIZ's position that ABIZ is not responsible for the equipment or the unpaid invoices. Edward E. Babcock, ABIZ Vice President of Finance, has stated that "ABIZ did not place orders for much of the equipment, and that ABIZ has notified Lucent that it would like to cancel the orders." More importantly, Mr. Babcock has stated that ABIZ no longer needs the equipment. Therefore, Lucent believes that it is in the best interests of ABIZ and Lucent for the Morrow Equipment to be sold by Lucent on the open market. The sale of the equipment will capture the best price for it. Kept in storage, the equipment will continue to depreciate and become obsolete. Mr. Lubertazzi believes that Lucent should be granted relief from the automatic stay to sell the Morrow Equipment because ABIZ has represented that it does not need the equipment and is not responsible for it. Therefore, by ABIZ's own admission, the equipment is not necessary for an effective reorganization. Mr. Lubertazzi contends that there is also good cause for the Court to grant Lucent relief from the automatic stay to sell the equipment. The continued storage of the equipment will only lead to the equipment's depreciation and eventual obsolescence while storage costs associated with the Morrow Equipment continue to mount. Therefore, it is in the interest of both parties for the equipment to be sold on the open market. ----------------------------------------------------------------- [00063] ABIZ'S MONTHLY OPERATING REPORT - April 30, 2002 ----------------------------------------------------------------- Adelphia Business Solutions, Inc. Consolidated Statements Of Earnings Revenues $ 28,076,272 Operating expenses: Network operations 15,942,354 Selling, general and administrative 17,226,137 Bankruptcy charges 1,175,000 Depreciation and amortization 8,899,639 --------------- Total Operating Expense 43,243,129 Operating loss (15,166,857) Other income (expense): Interest income 25,757 Interest expense (514,489) Interest expense - affiliate - --------------- Loss before equity in income of joint ventures (15,656,589) Equity in income of joint ventures 833,310 --------------- Net loss $ (14,822,279) =============== Adelphia Business Solutions, Inc. Consolidated Balance Sheet ASSETS Current assets: Cash and cash equivalents $ 3,217,100 Accounts receivable - net 75,773,632 Other current assets 23,136,286 --------------- Total current assets 102,127,018 Restricted cash - PA Contract 19,091,120 Investments 56,170,931 Property, plant and equipment - net 653,902,054 Other assets - net 45,295,443 --------------- Total Assets $ 876,586,566 LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current liabilities: Accounts payable $ 105,249,937 Due to Adelphia Communications - net 46,268,368 Accrued interest 68,556,502 Accrued interest - Adelphia Communications 30,721,872 13% Senior Discount Notes due 2003 303,840,000 12 ¬% Senior Secured Notes due 2004 250,000,000 12% Senior Subordinated Notes due 2007 300,000,000 Note payable - Bank 500,000,000 Other current liabilities 84,685,341 --------------- Total current liabilities 1,689,322,020 Other debt 45,241,857 --------------- Total liabilities 1,734,563,876 12 7/8% Senior Redeemable Preferred Stock 349,238,373 Common stock and stockholders' deficiency: Class A common stock 1,210,802 Class B common stock 134,371 Additional paid in capital 1,128,285,373 Unearned stock compensation (2,013,344) Accumulated deficit (2,334,832,893) --------------- Total common stock and stockholders' deficiency $(1,207,215,681) Total Liabilities & Stockholders' Deficiency $ 876,586,568 =============== Adelphia Business Solutions, Inc. Consolidated Statement Of Cash Flows Cash flows from operating activities: Net Loss $ (14,822,279) Adjustments to reconcile net loss to net cash provided by (used in) Operating activities: Depreciation 7,856,337 Amortization 1,043,302 Equity in net loss (income) of joint ventures (833,310) Bankruptcy Costs - Changes in operating assets and liabilites Other assets-net (2,095,239) Accounts payable 10,617,334 Accrued interest and other liabilities 1,649,792 --------------- Net cash provided by operating activities 3,415,935 Cash flows from investing activities: Expenditures for property, plant and equipment (4,767,296) Investments in restricted cash - net (25,757) Investment in subsidiary (563,515) --------------- Net cash used in investing activities (5,356,568) Cash flows from financing activities: Repayment of debt (487,975) Repayment to Adelphia Communications (885,453) --------------- Net cash provided by financing activities (1,323,428) Increase (decrease) in cash and cash equivalents (3,314,061) Cash and cash equivalents, beginning of period 6,531,161 --------------- Cash and cash equivalents, end of period $ 3,217,100 =============== ----------------------------------------------------------------- [00064] ABIZ COMPLETES 1,000 MILES OF FIBER OPTICS CONTRACT ----------------------------------------------------------------- COUDERSPORT, Pennsylvania -- May 3, 2002 -- Adelphia Business Solutions Inc. announced today that it has completed 1,000 miles of fiber optic line in rural Pennsylvania under its telecommunications contract with the Commonwealth of Pennsylvania. Adelphia Business Solutions said it expects to complete another 1,500 miles by the end of the year. Including the 2,500 miles that were in the ground before the state contract, Adelphia Business Solutions will have built a network of 5,000 miles in Pennsylvania when the project is completed. That's enough fiber optics to make 16 trips between Pittsburgh and Philadelphia. "When we were selected two years ago, we said we would work diligently to meet and exceed the state's service expectations," said James Rigas, CEO of Adelphia Business Solutions. "Those expectations included a greater good: to bring fiber optics to many more communities across the state, especially those in under-served areas. Access to advanced fiber optic networks is vital in today's high-tech world for providing educational opportunity and economic growth, much as access to highways and railroads has been important in our past. "From East Stroudsburg to Edinboro, Lebanon to Lock Haven, Washington to Williamsport, we are delivering thousands of miles of fiber optics that will make a world of difference in some of Pennsylvania's smaller communities." The announcement, Rigas said, reaffirms that while Adelphia Business Solutions reorganizes its debts under federal bankruptcy protection, its customers should notice no difference in daily operations. "While our balance sheet has been ailing, our operations continue to remain sound as ever," Rigas said. Based in Coudersport, Adelphia Business Solutions provides integrated communications services to business customers through its state-of-the-art fiber optic communications network. Under its state contract, Adelphia Business Solutions leads a consortium of 16 deep-rooted Pennsylvania companies providing high-bandwidth voice, data, Internet and video networking to state government, including state agencies and the State System of Higher Education. But the plan also extends the state-based telecommunications infrastructure to an extensive network of communities throughout the state, with an emphasis on under-served rural and urban communities. In a partnership, the Commonwealth and Adelphia Business Solutions formed Key-Net Alliance to provide communities, businesses, industry and educational institutions with access to the latest communications technologies. Blair, Bedford and Centre counties formed a marketing alliance to draw businesses to a 90-mile stretch they have dubbed the I-99 Innovation and Technology Corridor. Adelphia Business Solutions, through Key-Net, is in the process of installing fiber optics along the corridor. "Increasingly, site-selection inquiries place the availability of high-speed telecommunications as a prerequisite in their search," said Martin J. Marasco, president and CEO of the Altoona-Blair County Development Corp. "While the future of Central Pennsylvania will continue to see a diverse economic mix between service industry, education, technology, transportation and advanced manufacturers, each will demand a complete telecommunications infrastructure, equal to that of major metropolitan areas, to support their operations. Simply put, if we build it, we have the advantage. " Altoona-Blair County Development Corp. believes that economic development is not possible without solid partnerships. Partnerships between counties, educational providers, government agencies and private industry. The KeyNet Alliance represents the best of those elements, and we are pleased to be a part of it." *** End of Issue No. 7 *** ------------------------------------------------------------------------- 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 -------------------------------------------------------------------------