UPDATE 1-Adelphia bankruptcy exit plan delayed by judge

Wed Jan 24, 2007 11:24am EST

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NEW YORK Jan 24 (Reuters) - Adelphia Communications Corp. ADELQ.PK, once the fifth-largest U.S. cable operator before it collapsed in an accounting scandal, was blocked from moving ahead with plans to emerge from bankruptcy protection, a federal judge ruled on Wednesday.

Judge Shira Scheindlin of the U.S. District Court in Manhattan granted a bondholder group's request to extend a stay issued this month by the bankruptcy court.

The extension gives the bondholders a chance to argue on appeal that the plan undervalues their claims.

Adelphia originally expected to emerge from Chapter 11 on Jan. 17, two weeks after the bankruptcy court confirmed its reorganization plan.

The latest delay will further postpone the public trading of shares of Time Warner Cable Inc., a cable operator. Adelphia is using part of a 16 percent stake in Time Warner Cable worth nearly $6 billion to pay creditors.

Scheindlin ordered the bondholder group to post cash or a bond of $1.3 billion within 72 hours, including $130 million to be posted within 24 hours.

The judge wrote that delaying Adelphia's emergence from Chapter 11 "threatens grave harm to thousands of parties who have been waiting for more than four years to obtain sizeable distributions."

She nevertheless concluded that the bondholder group has shown "both irreparable harm and a substantial possibility of success on the merits of their objections."

Lawyers for Adelphia and the bondholder group did not immediately return calls seeking comment.

The bondholder group consists of 11 holders or investment advisers to holders of more than $1 billion of debt issued by Adelphia, including affiliates of Bank of America Corp. (BAC.N) and Lehman Brothers Holdings Inc. LEH.N.

A lawyer for the group said at a Jan. 17 hearing that $250 million is "an approximation of a high side benefit if we win here for my clients," Scheindlin wrote.

Adelphia, now based in Greenwood Village, Colorado, filed for protection from creditors in June 2002.

Founder John Rigas was sentenced to 15 years in prison, and his son Timothy, once Adelphia's chief financial officer, was sentenced to 20 years. Both were freed pending appeal.

Adelphia once had about 5 million subscribers.

(Additional reporting by Yinka Adegoke)

((Reporting by Jonathan Stempel, editing by Dave Zimmerman; Reuters Messaging: jon.stempel.reuters.com@reuters.net, 646 223 6317)) Keywords: ADELPHIA/

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