Leading the News: Adelphia Founder Resigns as Firm Probes Its Audits
Adelphia Communications Corp., the nation's sixth-largest cable-television concern that has come under regulatory scrutiny for possible improper accounting, said its founder John J. Rigas resigned as chairman and chief executive and the company launched an internal investigation amid allegations of additional improper business dealings with the Rigas family.</br></br>Mr. Rigas's departure, at the behest of two of the cable company's outside directors, was an apparent effort to shore up investor confidence in the Coudersport, Pa., company, whose stock has withered in recent weeks. But the move may be too late to save Adelphia from a cash crunch and bankruptcy proceedings, according to credit-ratings agencies and people familiar with the situation. Adelphia must make a $50 million interest payment on its $14 billion debt this week. Adelphia also is scheduled to appear today at a hearing before the Nasdaq Stock Market over its possible delisting, a move that would allow bondholders to require Adelphia to pay out $1.4 billion in cash.</br></br>Yesterday, both Moody's Investors Service and Standard and Poor's Corp. downgraded Adelphia's credit rating, already below "junk" status. Moody's in a statement said, "The prospect of a potential bankruptcy filing is more likely and may ultimately be unavoidable."</br></br>The company named Erland E. Kailbourne, a board member and former executive of Fleet National Bank, to be chairman and interim chief executive.</br></br>Adelphia disclosed in April that the company had co-guaranteed $2.3 billion in loans to entities owned by the Rigas family. A portion of the funds was used by the family to buy Adelphia stock. The Securities and Exchange Commission is conducting a formal investigation of Adelphia and the loan agreements.