Rigas family gives up control of Adelphia
PHILADELPHIA (AP) – The family that founded Adelphia Communications Corp. has agreed to relinquish control of the troubled cable provider and turn over $1 billion in assets to help it recover from a financial crisis, the company announced Thursday. Under the agreement, company founder John Rigas and his sons Timothy, Michael and James resigned as directors of the nation’s sixth-largest cable provider, the company said. Rigas’s son-in-law, Peter Venetis, has also been asked to resign from the board.
Adelphia’s stock price plunged early Thursday afternoon when the Nasdaq resumed trading after halting it for more than a week. The stock was trading at $2.64, down more than 50 percent over its closing price May 14.
Adelphia, based in Coudersport in rural northern Pennsylvania, has been struggling since it revealed in March that it failed to disclose that it had guaranteed billions of dollars in borrowing by the Rigas family and family-owned partnerships for which the company might bear liability.
The company said that as a result of talks with the Securities and Exchange Commission it had agreed to increase to $2.5 billion the amount of debt included on its financial statements to reflect the full amount of borrowings by the family.
Adelphia now estimates that it is liable for $3.1 billion in family debts. Under the agreement announced Thursday, the Rigas family is to turn over $1 billion in assets to Adelphia to cover the loans, which were not initially listed on the company’s balance sheet.
The family also will turn over $567 million in cash flow from other cable companies that it owns to cover the obligations. Furthermore, all Adelphia stock owned by the Rigas family will be placed in a voting trust until the family is able to repay the loans and advances, and all common and preferred stock held by the family will be pledged to the company as collateral for the balance of the loans.
Adelphia Chairman and interim Chief Executive Officer Erland E. Kailbourne called the deal, “an appropriate and useful step on the part of the Rigas family toward restoring the company’s credibility with shareholders, lenders and the marketplace as a whole.”
Adelphia is under investigation by the SEC and federal grand juries in Pennsylvania and New York, and had trading in its stock halted after May 14 as the Nasdaq sought additional information.
The agreement allows the family to appoint two new directors to Adelphia’s board. Both must be “non-family members,” the company said.
Michael and James Rigas, who were executive vice presidents, also resigned as officers of the company. Last week, John Rigas resigned as president, chief executive officer and chairman and Tim Rigas resigned as executive vice president, chief financial officer, chief accounting officer and treasurer.
As part of his severance agreement, John Rigas will be given $1.4 million per year for the next three years.
In 1952, Rigas was operating a small movie theater in Coudersport when a friend talked him into buying a franchise that delivered broadcast television signals, captured on a large antennae, via cable to rural subscribers.
Rigas and his brother, Gus, gradually built the business into a larger cable operation, borrowing money and buying small suburban cable operations instead of large city franchises. They named their company “Adelphia,” Greek for “brothers.”
John Rigas bought out Gus Rigas’ interest in 1983.
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