Adelphia debtor noteholders' committee appeals denial of trustee appointment, exclusivity termination

By Caroline Salls

Pittsburgh, Jan. 26 - Adelphia Communications Corp. debtor Arahova Communications Inc.'s ad hoc noteholders committee appealed the bankruptcy court's denial of its requests to appoint a Chapter 11 trustee for Arahova and terminate its exclusivity, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The committee's appeal will be heard by the U.S. District Court for the Southern District of New York.

In its order to deny the motions, the bankruptcy court said the committee's motions represented the "nuclear war button" that would result in "devastatingly adverse consequences."

In particular, the court said appointment of a trustee would constitute a default under the company's debtor-in-possession facility agreement, which would "substantially impair" all of the Adelphia debtors' ability to operate their businesses.

According to the order, Arahova focused its efforts on maximizing value for every debtor, never acted against the interests of any individual debtor and proposed and gained approval of a mechanism for inter-creditor disputes to be litigated in a way that would give the creditors a full opportunity and the resources needed to present their case.

The court also said it was troubled by the fact that the conflict issues were raised so late in the bankruptcy case, while the supposedly disabling conflicts were apparent in the case more than three years ago.

In connection with the motion to terminate Arahova's exclusivity, the court said the committee's request "is still another tactical measure, to muddy the waters and complicate the debtors' presently pending plan efforts," with no corresponding ability to propose a plan that would work for Arahova, much less one that would give Arahova's creditors more value.

Adelphia, a Greenwood Village, Colo.-based cable operator, filed for bankruptcy on June 25, 2002. Its Chapter 11 case number is 02-41729.

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