Adelphia Communications’ Bankruptcy Essay
The case talks about the situation Adelphia went through after the governance problem and fraud they had that led them to bankruptcy. Adelphia being a family owned company; by April 2005 they decided to sell out the remaining assets of the company to the one of the other 3 big cable companies; Time Warner, Comcast and Cablevision; each one of them offered different amount in the bid, nevertheless the company had to analyze how certain each offers were, how probable was any of them to pull out the offers as well as what to do with the money they would get in case the judge let them do the sell.
Adelphia was founded and managed by Rigas family, the case talks about how the …show more content…
By 1998; the case shows how company decided to expand and enter the broadband internet service. Adelphia started to acquire and purchase different providers around the country and added $6 billion to their debt account. Adelphia was at that time the sixth larger cable provider in the country but also had one of the largest debt-to-market cap ratios in the country of 11, 9 times larger than Comcast’s and 25 times larger than Cox’s. As Adelphia grew; the Rigas family not only did not want to sell any shares, but they wanted to purchase more stock for themselves so they decided to create a “co-borrowing” arrangement where the company would lend money to the family in order to purchase shares. The family got a hold of $200 million in a loan that was supposed to be paid by the privately own assets and companies the family had and be deposited directly in the cash account of Adelphia’s. This continued and the case shows how by the end of 2001, the co-borrowing agreements reached $5.63 billion.
By March of 2002; Adelphia had to disclose the amount of capital lend to the Rigas family and also disclose that this money was used by the family to purchase large amount of stocks from the company. In result; the stock price fell 27% in just 2 days. By April 2002; the Securities and Exchange Commission launched an investigation in the