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Century Communications Corp., a main subsidiary of Adelphia Communications Corp., filed for Chapter 11 bankruptcy protection late Monday, the first casualty of off-balance-sheet loans made to the founding Rigas family and backed by the company. The filing was the fourth in a series of blows the troubled company has absorbed. Leonard Tow and his ally, Scott Schneider, ended their two-week run on the cabler’s board. The accounting firm Deloitte & Touche lashed back at the company after it was fired as Adelphia’s auditor. And Adelphia disclosed in a regulatory filing that it would restate financial numbers and subscription totals. A Wachovia Securities Inc. analyst, Jim Boyle, summarized Adelphia’s stream of revelations by saying, “They continue to surprise, surprise, surprise.” The Century filing holds particular relevance because it represents the systems Adelphia acquired from Tow about two years ago. As one of Adelphia’s largest subsidiaries, Century, also known as Arahova Communications Inc., features just over 2 million subscribers and has approximately $2 billion of face amount notes outstanding. In downgrading Adelphia’s debt instruments last week, a Moody’s analyst, Russell Solomon, said Century bondholders “could suffer loss severity of as much as 50 percent or more.” Additional details surrounding the bankruptcy filing, including whether Century was able to secure DIP financing, were not available. Sources last week said Adelphia’s attempts to secure up to $2 billion in financing were being obstructed, in part, by Tow’s objection to asset sales at what he deemed to be depressed valuations. The 12 percent equity holders’ resignation could increase the likelihood of obtaining the financing. “Leonard had a certain amount of bias in that he didn’t want to see any of his previous assets get sold for discounts rather than premiums,” said Sean Badding, a Carmel Group analyst. “With Tow now out of the way, the door to raising money is at least open.” Adelphia has approached several major banks, including Salomon Smith Barney Inc., Bank of America Securities LLC, J.P. Morgan and Wachovia, about participating in the financing package. Sources said these prospective lenders, many of whom double as Adelphia senior creditors, want such financing to hinge on Adelphia’s asset sale program, which would produce cash collateral. Tow and Schneider made much the same point as Boyle in their resignation letter to Adelphia’s CEO, Erland Kailbourne. “Our goal was to do everything in our power to help restore the company’s credibility and stabilize it financially,” they wrote. “However, subsequent revelations of the unreliability of corporate data, as well as the ongoing serial disclosures of wrongdoing, have made it impossible to contribute meaningfully to the process.” The most recent evidence of that “unreliability” came in an 8-K filing with the U.S. Securities and Exchange Commission. In the filing, the three remaining Adelphia board members revised revenue downward for the last two years by a combined $130 million and Ebitda for the same period by $370 million. For this year, Adelphia’s management expects Ebitda to increase to about $1.3 billion. While press reports last week suggested Adelphia overstated its subscribers by as much as 500,000, or 10 percent, management put the figure at a much lower 47,500, about 1 percent of its reported base. The Coudersport, Pa.-based company now claims 5.763 million subscribers. Management also believes Adelphia’s plant upgrade numbers, already lagging behind its industry brethren, are “unreliable.” Adelphia gave no indication of the effect Tow’s departure may have on obtaining financing. “We are disappointed that Messrs. Tow and Schneider chose not to continue their service as directors and help Adelphia resolve the challenges it faces,” the company said in a statement. The statement added that the company “remains committed to … restoring [its] credibility among its key stakeholders.” In its own damage-control effort, Deloitte issued a strongly worded response to its dismissal Sunday as Adelphia’s auditor. Upon suspending its audit in May, “Deloitte informed [Adelphia] that it would not resume its audit until it was satisfied that the company had performed an independent investigation of certain matters, including whether persons employed by the company were engaged in illegal activity,” the firm said in a statement. “Deloitte confirmed its position in writing to the company in a letter dated June 9, 2002, prior to learning that Adelphia had terminated Deloitte as its independent auditor on that same date.” Copyright �2002 TDD, LLC. All rights reserved.

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