Adelphia Comes Clean

Can Vanessa Wittman help bring scandal-wracked Adelphia out of bankruptcy -- and back into investors' good graces?

Convincing Wittman (one of the few new executives at Adelphia who didn’t come from AT&T Broadband) to come aboard was also a major coup, says Kersey. Having just finished helping 360networks through a successful bankruptcy, says Wittman, “there were those who asked, ‘Why in the world would you go and do another bankruptcy? It’s a total mess. Wasn’t it bad enough the first time?’” Her answer: she enjoys a challenge.

But Wittman didn’t realize how big a challenge Adelphia posed. Every day during her first six weeks on the job, she found out “something more stunning than the last [day],” she says. During her first days as CFO, she found herself getting up in the middle of the night to work. When she mentioned her inability to sleep to one of the senior lawyers on the team, he sympathized. “Yeah,” he said, “that happens to everyone for the first few months.”

Wittman’s first order of business was to help Adelphia get its hands on $1.5 billion in DIP financing. Although the company had already arranged the loan, it couldn’t access all of the funds until it had an interim budget in place. “In record time, we negotiated the covenant with the banks and got access to the DIP facility at the end of May,” says Wittman.

An even more daunting task for the new finance team was to restate Adelphia’s results for fiscal years 1999, 2000, and 2001, which meant also compiling 1998 numbers to get an opening balance. “It was a giant ball of hair,” declares Wittman. “There were over 7 million transactions that had to be reviewed.” Chief accounting officer Scott McDonald concentrated on the restatements so the CFO could focus on bankruptcy duties. McDonald found plenty of fraud—and sloppy work. “There was horrible record-keeping, lots of financial manipulation, and inconsistently applied policies where policies existed,” says Wittman. Working lots of overtime, McDonald and his colleagues finished the restatements in eight months and delivered them to Adelphia’s new auditor, Pricewaterhouse-Coopers, in November.

Meanwhile, the finance team is working on the sale of noncore assets, including cable-system interests in Latin America and, adds Wittman, “grass seed for the golf course.” The staff also completed the construction of the intercompany balances—necessary for developing a valuation model for the company—and a five-year plan. “We have been going with our hair on fire since May,” says Wittman, who is quick to credit Schleyer, Cooper, and her finance staff for their hard work. “There is no way you could clean up a mess this big,” she says, without a “really deep, very dedicated team.”

The Credibility Question

In addition to the messy bankruptcy, Adelphia has major operational hurdles ahead. Industry experts say the company lagged its competitors in providing subscribers with high-end services, such as digital cable, high-speed Internet access, video on demand, and high-definition television. “This is where all the growth in the industry is coming from,” says Current Analysis’s Kersey. While the networks of most of the large cable providers have been about 95 to 99 percent updated to provide high-end services, Adelphia’s stand at only 70 to 80 percent. “That certainly puts them in a more vulnerable position,” says Kersey. He says Adelphia will continue to lose market share until it can update those subscribers.

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