Allen Said to Be Near Deal With Adelphia

In an attempt to stave off bankruptcy, cable operator Adelphia Communications Corp. was in intense negotiations late Thursday with billionaire Paul Allen to secure a loan of as much as $2 billion, sources close to the talks said.

Allen, who controls the nation’s fourth-largest cable firm, Charter Communications Corp., was putting the finishing touches on the deal, which would be structured to protect him if Adelphia is forced to file for Chapter 11 bankruptcy protection. In exchange for his support, Allen would buy cable systems from Adelphia, including its lucrative franchises in Southern California.

Under the complicated deal, Allen would buy pieces of Adelphia in stages. For instance, Allen would buy 450,000 of Adelphia’s 1.2 million customers in Southern California with an option to purchase the remaining properties at a future date. He is also interested in assets on the East Coast, including systems in North Carolina and Georgia.

For Adelphia, the chances of a bankruptcy filing increased Thursday when Nasdaq announced plans to delist the stock Monday. Adelphia had missed several deadlines to file an annual financial report.

The delisting would give bondholders the right to force Adelphia to buy back $1.4 billion in convertible debt, which could cause the company to file for bankruptcy protection, analysts have said.

At the same time, Adelphia shareholder Leonard Tow, who joined the company’s board Tuesday, is attempting to block any quick sale, particularly the prized Los Angeles cable systems, by the company.

In a regulatory filing Thursday, Tow, whose family owns 12% of Adelphia’s stock, told interim Chief Executive Erland Kailbourne to hold off on any decisions until a board meeting Saturday.

Tow’s filing said the company is rushing to complete a cable deal by tonight.

Coudersport, Pa.-based Adelphia is the target of an accounting investigation by U.S. regulators because of loan guarantees to the founding Rigas family.

Adelphia has said the family and partnerships it owned used company funds to finance private transactions without board approval.

The Rigases’ partnerships borrowed $3.1 billion that was backed by Adelphia, according to a regulatory filing.

In the last two weeks, John Rigas and his three sons have stepped down from their executive posts and relinquished control of Adelphia.

Tow became Adelphia’s largest shareholder after the Rigases in 1999, when he sold Century Communications’ cable systems to Adelphia for $5.2 billion. At the time, Century was the largest cable operator in Los Angeles.

Sources said Tow may be working with Adelphia’s lenders to delay immediate payments and keep the company out of bankruptcy.

Tow would rather work out a new debt-payment schedule with the banks than sell Adelphia’s best cable assets, especially Los Angeles, at fire-sale prices.

Allen is willing to pay Adelphia $3,400 to $4,200 per subscriber for the cable systems he is interested in, sources said.

Some Adelphia investors and bondholders are campaigning for Tow to take over as the company’s chairman.

Kailbourne said in a letter to Tow that was released late Thursday, “No transaction would be completed internally or otherwise before the board meeting.” He also acknowledged Tow’s proposal to become chairman.