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Adelphia Shares Fall on New Reports

Telecom: Cable firm may have kept two sets of accounting books and inflated subscriber base.


Adelphia Communications Corp.'s shares plummeted Friday and its bonds fell as investors feared the cable TV operator lied about its finances and subscriber growth, and may have fewer assets to parse out in case of bankruptcy.

"The one thing Wall Street hates more than uncertainty is deception, and that's what we're talking about here," said Peter Andersen, head of high-yield securities at Delaware Management Co. in Philadelphia, which has sold its Adelphia bonds.

The declines came after reports Friday that the cable TV operator may have kept two sets of accounting books and inflated its subscriber base by as much as 500,000, or about 10%. Adelphia declined to comment Friday.

If true, the revelations would show Adelphia's business is worth less than investors thought, and that creditors would recover less if a bankruptcy occurs.

"The thinking had been their customer base is still high-quality and intact," said Gary Farber, an analyst at Suntrust Robinson Humphreys in New York. "If there are fewer customers there, that's a very different scenario."

Coudersport, Pa.-based Adelphia faces a Securities and Exchange Commission accounting probe and two federal grand jury probes into multibillion-dollar off-balance-sheet loans to its founding Rigas family.

The firm failed to file its 2001 annual report, has been delisted from Nasdaq, has defaulted on bank-credit deals, missed $44.7 million of interest and dividend payments and faces potential demands to repay $1.4 billion of convertible debt immediately.

It faces a June 15 deadline to pay the interest, which analysts expect it to miss.

Adelphia also is seeking cash, trying to sell systems covering about half of its reported 5.8 million subscribers.

Adelphia shares fell 36 cents to 30 cents in over-the-counter trading Friday. They peaked at $87 in May 1999.

Analysts said subscribers are key to valuing a cable TV operator, which is why investors on Friday were alarmed.

"If there are 400,000 or 500,000 subscribers fewer, that suggests the value of Adelphia's assets are down between $1.2 billion and $1.75 billion," said Lehmon Bros. analyst Bob Berzins.

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