New York – A federal judge blocked Adelphia’s $15 billion reorganization plan Wednesday, saying bondholders had demonstrated a “substantial possibility” of showing that a bankruptcy judge had made mistakes in approving it.
U.S. District Judge Shira Scheindlin said she would require bondholders challenging the plan to post $1.3 billion because a delay could cost the bankruptcy estate more than $1 billion in additional costs or “could even cause the plan to collapse.”
The bankruptcy case was filed in June 2002 after Adelphia Communications Corp. disclosed it had $2.3 billion in off-balance-sheet debt and $18.6 billion in total debt. The substance of its operations was sold to Time Warner Cable Inc. and Comcast Corp. in a deal approved July 31.
If confirmed, the proposed plan would distribute what is left of the Adelphia estate, worth about $15 billion, to bank lenders, creditors and bondholders and allow it to begin winding down its business.
Scheindlin said a stay was necessary because, without it, it was “extremely unlikely” that the bondholders would ever receive meaningful appellate review of the bankruptcy court’s rulings, and, once set in motion, “the plan truly cannot be unraveled.” Yet, she added, “a stay of a confirmation order in one of the longest-running and most complex bankruptcies in our history threatens grave harm to thousands of parties who have been waiting for more than four years to obtain sizeable distributions from a group of bankrupt estates.”
