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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2012

 

or

 

o           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                    to

 

Commission File Number: 000-53209

 

Adelphia Recovery Trust

(Exact name of registrant as specified in its charter)

 

Delaware

 

11-6615508

(State or other jurisdiction of incorporation or
organization)

 

(I.R.S. Employer Identification No.)

 

919 North Market Street, 17th Floor, PO Box 8705

Wilmington, Delaware 19899

(Address of principal executive offices) (Zip Code)

 

302-652-4100 Attn: Dean Ziehl

(Registrant’s telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yesx No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company x

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o Yes No x

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  o Yes No o

 

 

 



Table of Contents

 

ADELPHIA RECOVERY TRUST

FORM 10-Q

INDEX

 

PART I — FINANCIAL INFORMATION

3

 

 

 

 

ITEM 1. FINANCIAL STATEMENTS (unaudited)

3

 

 

 

 

Condensed Balance Sheets as of September 30, 2012 and December 31, 2011

3

 

 

 

 

Condensed Statements of Operations for the three and nine months ended September 30, 2012 and 2011

4

 

 

 

 

Condensed Statements of Cash Flows for the nine months ended September 30, 2012 and 2011

5

 

 

 

 

Notes to Condensed Financial Statements

6

 

 

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

9

 

 

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

14

 

 

 

 

ITEM 4. CONTROLS AND PROCEDURES

14

 

 

 

PART II

15

 

 

 

 

ITEM 1. LEGAL PROCEEDINGS

15

 

 

 

 

ITEM 1A. RISK FACTORS

17

 

 

 

 

ITEM 6. EXHIBITS

17

 

 

 

SIGNATURES

18

 

 

 

CERTIFICATIONS

 

 

2



Table of Contents

 

PART 1 - FINANCIAL INFORMATION

 

Item 1   Financial Statements

 

Adelphia Recovery Trust

Unaudited Condensed Balance Sheets

 

 

 

As of
September 30, 2012

 

As of
December 31, 2011

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

55,590,816

 

$

72,578,669

 

Prepaid assets

 

497,884

 

1,234,649

 

Note and accrued interest receivable

 

6,851,371

 

6,558,853

 

Total assets

 

$

62,940,071

 

$

80,372,171

 

 

 

 

 

 

 

Liabilities and net assets

 

 

 

 

 

Accrued expenses

 

$

306,441

 

$

317,506

 

Total liabilities

 

306,441

 

317,506

 

 

 

 

 

 

 

Net assets

 

62,633,630

 

80,054,665

 

 

 

 

 

 

 

Total liabilities and net assets

 

$

62,940,071

 

$

80,372,171

 

 

See accompanying notes to condensed financial statements.

 

3



Table of Contents

 

Adelphia Recovery Trust

Unaudited Condensed Statements of Operations

 

 

 

For the
three months
ended
September 30, 2012

 

For the
three months
ended
September 30, 2011

 

For the
nine months
ended
September 30, 2012

 

For the
nine months
ended
September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

Litigation - court approved settlements

 

$

20,000,254

 

$

 

$

20,000,254

 

$

 

Interest income

 

103,252

 

115,959

 

308,980

 

381,664

 

Total revenues

 

20,103,506

 

115,959

 

20,309,234

 

381,664

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

345,949

 

339,011

 

1,411,240

 

1,449,601

 

Professional expenses - litigation

 

1,850,334

 

2,121,858

 

5,793,948

 

6,037,362

 

Professional expenses - administrative

 

158,718

 

170,953

 

525,081

 

647,647

 

Total operating expenses

 

2,355,001

 

2,631,822

 

7,730,269

 

8,134,610

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

17,748,505

 

$

(2,515,863

)

$

12,578,965

 

$

(7,752,946

)

 

See accompanying notes to condensed financial statements.

 

4



Table of Contents

 

Adelphia Recovery Trust

Unaudited Condensed Statements of Cash Flows

 

 

 

For the
nine months
ended
September 30, 2012

 

For the
nine months
ended
September 30, 2011

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Net income (loss)

 

$

12,578,965

 

$

(7,752,946

)

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities consisting of changes in operating assets and liabilities:

 

 

 

 

 

Prepaid assets

 

736,765

 

(755,606

)

Note and accrued interest receivable

 

(292,518

)

(292,518

)

Accrued expenses

 

(11,065

)

(801,476

)

Net cash provided (used) by operating activities

 

13,012,147

 

(9,602,546

)

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Sale of temporary investments and accrued interest

 

 

64,808,133

 

Net cash provided by investing activities

 

 

64,808,133

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Interest holder distributions

 

(30,000,000

)

 

Net cash used by financing activities

 

(30,000,000

)

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(16,987,853

)

55,205,587

 

Cash and cash equivalents, beginning of period

 

72,578,669

 

21,887,750

 

Cash and cash equivalents, end of period

 

$

55,590,816

 

$

77,093,337

 

 

See accompanying notes to condensed financial statements.

 

5



Table of Contents

 

ADELPHIA RECOVERY TRUST

 

Notes to Condensed Financial Statements — September 30, 2012 (Unaudited)

 

1                                         Background

 

The Adelphia Recovery Trust (the “ART”) was formed as a Delaware statutory trust pursuant to that certain First Modified Fifth Amended Joint Chapter 11 Plan of Reorganization (the “Plan”) of Adelphia Communications Corporation (“Adelphia” or “ACC”) and certain of its subsidiaries (collectively the “Debtor”). The purpose of the ART is to prosecute the various causes of action transferred to the ART pursuant to the Plan (the “Causes of Action”) and distribute to the owners (the “Holders”) of the interests in the ART (“Interests”) the net proceeds of such Causes of Action (“Distributions”), according to the relative priorities established pursuant to the Plan, subject to the retention of various amounts to fund the prosecution of those Causes of Action and operations of the ART. Pursuant to the Plan, in addition to the Causes of Action, Adelphia transferred $25.0 million in cash to the ART, in connection with its formation, in order to fund the initial expenses of operation.

 

As set forth in the Plan, the ART is administered by five trustees (the “Trustees”) who are responsible for carrying out the purposes of the ART. Quest Turnaround Advisors, L.L.C. (“Quest”) is the plan administrator (in such capacity, the “Plan Administrator”) of Adelphia. Quest and Adelphia together have agreed to provide certain administrative services to the ART. In order to facilitate the provision of such administrative services, the ART has appointed Quest as the trust administrator of the ART (in such capacity, the “Trust Administrator”).

 

2                                         Basis of Presentation

 

The accompanying interim unaudited condensed financial statements of the ART have been prepared in accordance with generally accepted accounting principles in the United States of America for interim periods (“US GAAP”) and with the instructions to Form 10-Q. As such, they do not include all of the information and disclosures required by US GAAP for complete financial statements. In the opinion of the Trustees, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the interim unaudited condensed financial statements have been included. These condensed financial statements should be read in conjunction with the ART’s audited financial statements for the year ended December 31, 2011 included in its Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 9, 2012. Interim results are not necessarily indicative of the results for the complete fiscal year. The unaudited condensed balance sheet as of December 31, 2011 was derived from the audited financial statements for the year then ended.

 

3                                         Related Party Transactions

 

The Trust Administrator and Adelphia continue to provide administrative support to the ART including maintaining electronic data and paper documents used in prosecuting the Causes of Action, financial reporting and support for Distributions when they might occur (including maintenance of data related to the implementation of Plan provisions). These services have and will continue to be provided at no cost to the ART under the terms of various agreements between the Trust Administrator and Adelphia. The ART financial statements do not reflect any amounts for these services.

 

4                                         Causes of Action

 

Except as set forth below, there have been no material developments in the legal proceedings described in the ART’s Form 10-K as filed on March 9, 2012 or as updated in the ART’s Form 10-Q filed on May 11, 2012 and August 9, 2012.

 

Pending Causes of Action

 

Goldman Sachs Litigation

 

On July 6, 2003, the Creditors Committee filed a complaint in the Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) against Adelphia’s pre-petition commercial banks and lenders, Adelphia’s former investment bankers and financial advisors, and assignees of Adelphia’s pre-petition bank debt (the “Bank Litigation”). On February 9, 2006, the United States District Court for the Southern District of New York (the “District Court”) granted a motion filed by certain defendants to withdraw the reference to the Bankruptcy Court. Pursuant to the Plan, the claims asserted in the Goldman Sachs Litigation were transferred to the ART.

 

6



Table of Contents

 

The complaint included a claim for intentional fraudulent transfer against Goldman Sachs, Inc. arising from Adelphia’s pre-petition repayment of the Rigases’ personal margin loans in an amount of approximately $63.0 million. On May 6, 2009, the Court denied Goldman Sachs’ motion to dismiss. Goldman moved for summary judgment on March 2, 2010. Following argument in August 2010, Goldman supplemented its motion on November 12, 2010. On April 7, 2011, the District Court granted Goldman’s summary judgment motion and judgment was entered on April 13, 2011. On May 6, 2011, the ART timely filed its notice of appeal to the Court of Appeals for the Second Circuit and subsequently filed an appeal. On April 25, 2012, the Second Circuit Court of Appeals heard oral argument on the appeal and took the case under advisement.

 

At this time, the ART cannot predict the outcome of the Goldman Sachs Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

FPL Litigation

 

On June 24, 2004, the Creditors’ Committee filed a fraudulent conveyance complaint against FPL Group, Inc. and West BocaSecurity, Inc. (collectively, “FPL”) in the Bankruptcy Court for the Southern District of New York relating to pre-petition transactions. The FPL action seeks to recover an alleged fraudulent transfer arising out of Adelphia’s repurchase of certain of its stock from FPL in January 1999 for $149.5 million. Pursuant to the Plan, the claims asserted in the FPL Litigation were transferred to the ART.

 

On July 13, 2011, the Bankruptcy Court denied FPL’s motion for leave to amend its answer to add a new defense. FPL filed an appeal of the Bankruptcy Court’s July 13, 2011 decision. FPL’s appeal has been briefed by the parties and is under submission to the District Court. On September 28, 2011, FPL moved to withdraw the reference to Bankruptcy Court. The District Court denied FPL’s motion to withdraw the reference on January 30, 2012. Trial began April 30, 2012 and testimony concluded on May 3, 2012. The parties submitted post-trial briefs on June 22, 2012. The Bankruptcy Court heard closing arguments on July 25, 2012.

 

At this time, the ART cannot predict the outcome of the FPL Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

Prestige Litigation

 

On June 24, 2004, the Creditors’ Committee filed an adversary action against Prestige Communications of NC, Inc., Jonathan J. Oscher, Lorraine Oscher McClain, Robert F. Buckfelder, Buckfelder Investment Trust, and Anverse, Inc. in the Bankruptcy Court for the Southern District of New York. In a decision dated January 8, 2008, the District Court withdrew the reference to the Bankruptcy Court in the Prestige action and transferred the case to the District Court.

 

The Prestige action seeks to recover fraudulent transfers in connection with Adelphia’s purchase of the assets of Prestige Communications of N.C., Inc., an acquisition that closed on July 5, 2000, as well as a claim that the owners of the Prestige Cable Systems aided and abetted breaches of fiduciary duty on the part of the Rigas family in connection with the transaction. Pursuant to the Plan, which became effective on February 13, 2007, the claims asserted in the Prestige Litigation were transferred to the ART.

 

7



Table of Contents

 

On October 27, 2009, Defendants moved for summary judgment on the ART’s claims.  On June 27, 2011, the District Court granted Defendants’ summary judgment motion and judgment was entered on June 28, 2011.  The ART timely filed its notice of appeal to the Court of Appeals for the Second Circuit.  The parties are briefing the appeal.

 

At this time, the ART cannot predict the outcome of the Prestige Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

Avoidance Actions

 

On July 31, 2003, Adelphia and its debtor affiliates filed with the Bankruptcy Court their Statements of Financial Affairs, which included a schedule of payments to insider entities made within one year prior to Adelphia’s filing for bankruptcy and payments to non-insider entities made within ninety days prior to Adelphia’s filing for bankruptcy. Subsequently, Adelphia engaged in extensive analysis of all such payments to determine if they could be avoided pursuant to certain provisions of the Code.

 

On April 20, 2004, Adelphia filed a motion seeking to abandon most of the potential actions to avoid the pre-petition payments because, among other reasons, (i) Adelphia believed that pursuing certain of such actions against parties with whom Adelphia was continuing to do business could have a significant adverse impact on important, ongoing business relationships, and (ii) the costs associated with pursuing such actions far outweighed any potential benefit to the Adelphia debtors’ estates that might otherwise result from bringing such actions. In response to certain objections to Adelphia’s motion, Adelphia amended its initial motion.

 

On May 27, 2004, the Bankruptcy Court entered an order tolling all claims to avoid inter-debtor payments and authorizing the abandonment of potential actions to avoid (i) transfers to taxing authorities; (ii) transfers to human resource providers engaged in business with Adelphia; (iii) transfers determined to have been made in the ordinary course of business; and (iv) certain transfers deemed de minimis. As to the remainder of the transfers made by Adelphia during the relevant one-year and ninety-day periods prior to the bankruptcy filing, Adelphia either (i) entered into tolling agreements with the transferee extending Adelphia’s time to initiate an action, or (ii) filed a complaint and initiated an adversary proceeding against the transferee.

 

As of June 25, 2004, Adelphia secured approximately 250 tolling agreements with various transferees, including members of the Rigas family, the Rigas family entities, former executives James Brown and Michael Mulcahey, and former directors Erland Kailbourne, Dennis Coyle, Leslie Gelber, and Peter Metros, among others. Certain of these tolling agreements have been amended from time to time. In addition, Adelphia filed approximately 150 complaints in the Bankruptcy Court commencing actions to avoid certain pre-petition transfers and payments. Some of those complaints have since been dismissed or resolved after further investigation.

 

On July 21, 2004, the Bankruptcy Court stayed all activity in the avoidance actions commenced by Adelphia and approved notice and service procedures in connection therewith.

 

At this time, the ART cannot predict the outcome of these proceedings or estimate the possible financial effect of these proceedings on the ART’s financial statements.

 

Buchanan Ingersoll

 

On June 27, 2012, the ART announced that it had reached a settlement with Buchanan Ingersoll & Rooney PC (“Buchanan”), subject to the approval of the United States Bankruptcy Court.  On July 18, 2012, the Bankruptcy Court entered an order approving the settlement.  No objections or appeals were filed in the period allowed for appeals, and on August 1, 2012 the settlement became final.  Buchanan served as Adelphia’s primary outside legal counsel for a number of years before Adelphia filed for bankruptcy protection in June 2002.  Under the terms of the settlement, Buchanan made an initial payment of $20.0 million to the ART, which was released to the ART on August 3, 2012 and was recorded, under the terms of the ART’s revenue recognition policy, in the third quarter of 2012.

 

As part of the settlement, the ART agreed to participate with other parties that have asserted claims against Buchanan in a binding Alternate Dispute Resolution proceeding (the “ADR Proceeding”) in which an additional $40.0 million will be distributed. The ART and other parties have made their submissions in the ADR Proceedings and those submissions are under advisement.

 

At this time the ART cannot predict how much, if any, of the $40.0 million will be awarded to the ART or estimate the possible financial effect of the ADR Proceedings on the ART’s financial statements.

 

8



Table of Contents

 

5                                         Fair Value of Financial Instruments

 

The ART invests in FDIC insured bank certificates of deposit (“CDs”). CD investments held by the ART as of December 31, 2011 matured in the first quarter of 2012. At maturity, the ART elected to re-invest in CDs with a maturity of 90 days or less when purchased. CDs with a maturity of 90 days or less when purchased are classified as cash and cash equivalents and those with a maturity exceeding 90 days are classified as temporary investments.  The ART had no temporary investments as of September 30, 2012 or December 31, 2011.

 

The fair value of the note receivable and accrued interest has been determined using unobservable inputs (i.e. Level 3, as defined in Accounting Standards Codification 820-10) and approximates $6.0 million as of September 30, 2012 and $5.2 million as of December 31, 2011. The fair value was derived by discounting to September 30, 2012 and December 31, 2011 the projected maturity value of the note including accrued interest. The projected maturity values, including interest were calculated using life expectancy tables. The discount rate is based on the yield on the notes issued by the life insurance companies underwriting the life insurance policies and various risk factors associated with the note.

 

The carrying values were approximately $6.9 million as of September 30, 2012 and approximately $6.6 million as of December 31, 2011. The note bears 8% simple interest and is recourse only to the proceeds of various life insurance policies on Mr. and Mrs. Leonard Tow totaling approximately $28.0 million.

 

6                                         Subsequent Events

 

Events subsequent to September 30, 2012 have been evaluated through November 9, 2012, the date the accompanying financial statements were issued. There have been no subsequent events that would be material to the financial statements of the ART, including Cause of Action settlements or judgments or Distributions or decisions concerning future Distributions.

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Overview

 

The ART was formed as a Delaware statutory trust pursuant to that certain First Modified Fifth Amended Joint Chapter 11 Plan of Reorganization of Adelphia and certain of its subsidiaries. The purpose of the ART is to prosecute the various Causes of Action transferred to the ART pursuant to the Plan and distribute to the owners of the Interests in the ART the net proceeds of such Causes of Action, according to the relative priorities established pursuant to the Plan, subject to the retention of various amounts to fund the prosecution of those Causes of Action and operations of the ART. Pursuant to the Plan, in addition to the Causes of Action, Adelphia transferred $25.0 million in cash to the ART in connection with its formation in 2007 in order to fund the initial expenses of operation.

 

The ART is not subject to Federal or state income taxes.  The ART is not aware of any transactions or events up to and including September 30, 2012 that would subject it to Federal or state income taxes.  Further, the ART has no unrecognized income tax benefits as of September 30, 2012 nor are there any amounts required to be included in the financial statements for interest or penalties on unrecognized income tax benefits.  Items of income, gain, loss, deduction and other tax items have been and will be allocated to the Holders that would be entitled to receive such items if they constituted cash distributions or reductions therefrom.  The Holders are responsible for the payment of taxes on a current basis that result from such allocations whether or not cash is distributed.

 

Adelphia and certain of its subsidiaries filed for Chapter 11 bankruptcy protection in June 2002. During the bankruptcy, on July 31, 2006 the assets of Adelphia were sold for a combination of cash and stock in Time Warner Cable, Inc. (“TWC”). In late 2006, representatives of various groups of creditors reached agreement on the allocation and distribution of the cash, TWC stock, other proceeds from the sale of estate assets and relative priorities to any Distributions arising from the Causes of Action contributed to the ART. This agreement was embodied in the Plan, which was confirmed in January 2007 and became effective on February 13, 2007 (the “Effective Date”). Under the Plan, the creditors and equity holders of Adelphia and certain of its subsidiaries received one or more of the following: cash, TWC stock, rights to future Distributions up to payment in full and the Interests.

 

The ART will dissolve upon the earlier of the resolution of all Causes of Action and the distribution of all of its assets to the Holders or December 31, 2014. However, the Bankruptcy Court may approve an extension of the term if deemed necessary for the purposes of resolving the Causes of Action and distributing the net proceeds to the Holders.

 

9



Table of Contents

 

As set forth in the Plan and the Declaration of Trust for the ART, as amended (the “Declaration”), the ART is administered by five Trustees. These Trustees are authorized to carry out the purposes of the ART. In particular, the Trustees are responsible for protecting, maintaining, liquidating to cash and maximizing the value of the Causes of Action contributed to the ART, whether by litigation, settlement or otherwise.

 

Distributions

 

Pursuant to the Plan and the Declaration, Distributions to Holders are net of any costs and expenses incurred by the ART in connection with administering, litigating or otherwise resolving the various Causes of Action. Such costs and expenses may also include fees and expenses of the Trustees, premiums for directors and officers insurance, and other insurance and fees and expenses of attorneys and consultants. Distributions will be made only from assets of the ART and only to the extent that the ART has sufficient assets (over amounts retained for future costs and expenses, among other things) to make such payments in accordance with the Plan and the Declaration. No Distribution is required to be made to any Holder unless such Holder is to receive in such Distribution at least $25.00 or unless such Distribution is the final Distribution to such Holder pursuant to the Plan and the Declaration.

 

Distributions will be made at the sole discretion of the Trustees in accordance with the provisions of the Plan and the Declaration. Previous Distributions occurred on December 21, 2010 for $215.0 million and on March 1, 2012 for $30.0 million in cash payable to Holders of Interests in the Trust in accordance with the waterfall priority established in the Plan. It is not possible to determine at this time if there will be future Distributions to the Holders of Interests in the Trust. No other Distributions are currently planned. As of September 30, 2012, the number of Interests outstanding in each series eligible to receive a Distribution is as follows:

 

CVV Series of Interest: 

 

As of September 30, 2012

 

Series RF (1)

 

115,000,000

 

Series Arahova

 

722,639,681

 

Series FrontierVision

 

86,600,001

 

Series FPL

 

25,575,129

 

Series Olympus

 

17,000,001

 

Series ACC-1

 

4,839,988,165

 

Series ACC-2

 

339,207,075

 

Series ACC-3

 

119,430,302

 

Series ESL (2)

 

17

 

Series ACC-4

 

1,790,968,272

 

Series ACC-5 (2)

 

458

 

Series ACC-6B

 

150,000,000

 

Series ACC-6B1 (2)

 

3

 

Series ACC-6D

 

575,000,000

 

Series ACC-6D1 (2)

 

229,004

 

Series ACC-6E/F

 

935,812,456

 

Series ACC-6E/F1 (2)

 

277,210

 

Series ACC-7

 

217,022,640

 

Series ACC-7A (2)

 

1,537,766,752

 

 


(1)        Series RF Interests are outstanding but were paid in full with the March 1, 2012 Distribution and are not eligible for future Distributions.

 

(2)        For each of these categories of Interests (which include disputed claims), each holder of a disputed claim was awarded one Interest. The underlying claims have been expunged or conditionally expunged and these corresponding Interests which are held by the ART Disputed Ownership Fund will be cancelled upon the dissolution of the ART.

 

10



Table of Contents

 

A schedule summarizing the Distribution priority waterfall as of September 30, 2012 is set forth below:

 

ART Distribution Waterfall Chart

September 30, 2012(1)

 

Remainig Aggregate Distribution (2)

 

Distribution Description (3)

 

ART Distribution Recipient

 

 

 

 

 

RF

 

0.00

%

 

 

 

 

Arahova

 

0.00

%

 

 

 

 

ACC-1

 

0.00

%

 

 

 

 

Olympus

 

0.00

%

 

 

 

 

FrontierVision

 

0.00

%

 

 

 

 

ACC-2

 

0.00

%

 

 

 

 

ACC-3

 

0.00

%

0

 

RF Holders Paid In Full

 

FPL

 

0.00

%

 

 

 

 

 

 

 

 

0 - 360,000,000

 

Until Series Olympus has received aggregate distributions of $16 million plus the Olympus Fees, plus accrued post-Effective Date dividends

 

Arahova

 

45.87

%

 

ACC-1

 

42.73

%

 

Olympus

 

5.00

%

 

FrontierVision

 

2.50

%

 

ACC-2

 

2.25

%

 

ACC-3

 

0.90

%

 

FPL

 

0.75

%

 

 

 

 

 

 

 

 

360,000,001 - 920,000,000

 

Until cumulative distribution is $1,165 million

 

Arahova

 

48.37

%

 

ACC-1

 

45.06

%

 

FrontierVision

 

2.50

%

 

ACC-2

 

2.37

%

 

ACC-3

 

0.95

%

 

FPL

 

0.75

%

 

 

 

 

 

 

 

 

920,000,001 - 4,343,000,000

 

Until Series Arahova has received $625 million plus the Arahova Fees plus accrued post-Effective Date dividends

 

ACC-1

 

76.60

%

 

Arahova

 

14.51

%

 

ACC-2

 

4.03

%

 

FrontierVision

 

2.50

%

 

ACC-3

 

1.61

%

 

FPL

 

0.75

%

 

 

 

 

 

 

 

 

4,343,000,001 - 4,908,000,000

 

Until Series FPL has received aggregate distributions of $6.2 million plus Default Interest, plus accrued post-Effective Date dividends (ACC-1 and ACC-3 paid in full)

 

ACC-1

 

90.11

%

 

ACC-2

 

4.74

%

 

FrontierVision

 

2.50

%

 

ACC-3

 

1.90

%

 

FPL

 

0.75

%

 

 

 

 

 

 

 

 

4,908,000,001 - 4,956,000,000

 

Until Series FPL has received aggregate distributions of $6.2 million plus Default Interest, plus accrued post-Effective Date dividends

 

ACC-2

 

96.75

%

 

FrontierVision

 

2.50

%

 

FPL

 

0.75

%

 

 

 

 

 

 

 

 

 

 

 

 

ACC-2

 

97.50

%

 

 

Until the holders of Claims in Class ACC Notes and in Classes ACC Trade and ACC Other Unsecured have been paid in full including Case Contract Interest (ACC Notes) and Case 8% Interest (ACC Trade and ACC Other Unsecured) and accrued post-Effective Date dividends

 

FrontierVision

 

2.50

%

 

 

 

 

 

 

 

 

4,956,000,001 - 4,961,000,000

 

Until Series FrontierVision has received aggregate distributions of $85 million plus 80% of the FrontierVision Fees, plus accrued post-Effective Date dividends

 

FrontierVision

 

100.00

%

 

 

 

 

 

 

 

 

4,961,000,001 - 5,025,000,000

 

Until the additional distribution to the Series Arahova Interests equals $50 million plus accrued post-Effective Date dividends at a rate of 5% per annum

 

Series Arahova

 

100.00

%

 

 

 

 

 

 

 

 

Not Quantifiable

 

Until ESL holders have received Payment in Full of their Claims and Case 8% interest plus accrued post-Effective Date dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

Not Quantifiable

 

Until ACC-4 holders have received the full amount of their Allowed Claims plus Case Contract Interest plus accrued post-Effective Date dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

Not Quantifiable

 

Until ACC-5 holders have received the full amount of their Allowed Claims plus Case 8% interest plus accrued post-Effective Date dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

Not Quantifiable

 

Until ACC-6 holders receive distributions in accordance with the relative priorities established by the Liquidation Preferences governing the shares of ACC Preferred Stock and the Bankruptcy Code

 

 

 

 

 

 

 

 

 

 

 

 

 

Not Quantifiable

 

Each ACC-7 holder is entitled to receive a pro rata share of any distributions remaining

 

 

 

 

 

 


(1)  Remaining aggregate distributions and ART distribution percentages are as of September 30, 2012.

 

(2) Pursuant to the terms of the Plan, certain series of Interests are entitled to post-Effective Date dividends on certain amounts due to the corresponding class of claims. For purposes of calculating the reference amount on which post-Effective Date dividends accrue, the distribution of the True-Up Holdback is treated as if it occurred on the Effective Date.  Remaining aggregate distributions have been reduced as a result of the $215 million cash distribution to certain CVV Holders as of December 21, 2010, the $30 million cash distribution on March 1, 2012 as well as distributions made by Adelphia for excess reserves and for refunds of reserves established for Settlement Party Fee Claims.

 

(3) Unless otherwise stated, post-Effective Date dividends accrue at a rate of 8.9% per annum.

 

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Results of Operations

 

The ART operates pursuant to the Plan and the Declaration. The ART was formed as a Delaware statutory trust to prosecute various claims originally owned by Adelphia and, if any of the prosecutions are successful or are settled in a manner which provides economic benefit to the ART, to distribute excess proceeds over amounts retained to fund the prosecution of the Causes of Action and operations of the ART, to the Holders. The Trustees will retain enough cash in reserve to administer the ART and fund the prosecution of the Causes of Action.

 

Due to the nature of the ART’s operations both revenue and operating expenses may fluctuate between and among reporting periods caused by activities and results related to the Causes of Action.

 

Third Quarter 2012 vs Third Quarter 2011

 

Total revenues consisting of court approved Cause of Action settlements and interest increased to approximately $20.1 million in the third quarter of 2012 from approximately $116,000 in the third quarter of 2011. The revenue increase of approximately $20.0 million was caused by a settlement related to the Buchanan Cause of Action for $20.0 million in the third quarter of 2012. There were no court approved settlements for the third quarter of 2011.

 

Total operating expenses for the ART decreased to approximately $2.4 million in the third quarter of 2012 from approximately $2.6 million in the third quarter of 2011. The cost decrease of approximately $0.2 million was caused by a decrease in professional litigation and professional administration costs of approximately $0.2 million and $12,000 respectively, offset by an increase in general and administrative costs of approximately $7,000.

 

Professional litigation costs decreased by approximately $0.2 million in the third quarter of 2012 compared to the third quarter of 2011 primarily due to decreased costs of $0.1 million related to the Bank / Goldman Causes of Action and $0.4 million for the FPL Cause of Action. The decreases were offset by increased professional expenses of $0.3 million for the Buchanan Cause of Action.

 

Professional administrative costs decreased by approximately $12,000 in the third quarter of 2012 compared to the third quarter of 2011. The decreased costs in the third quarter of 2012 relate to legal support costs incurred by the ART to manage trust operations, administrative requirements, Cause of Action oversight and regulatory compliance.

 

General and administrative costs increased by approximately $7,000 in the third quarter of 2012 when compared to the third quarter of 2011. The ART experienced increased costs of approximately $16,000 in the third quarter of 2012 for SEC filing and audit costs and had offsetting decreased costs of approximately $10,000 for bank fees and other administrative costs between the same comparable periods.

 

As a result of the increase in total revenues of approximately $20.0 million and the decrease in total operating expenses of approximately $0.2 million in the third quarter of 2012 compared to the third quarter of 2011, the net income of approximately $17.7 million for the quarter ended September 30, 2012 was approximately $20.2 million higher than the net loss for the quarter ended September 30, 2011.

 

Nine months ended September 30, 2012 versus the nine months ended September 30, 2011

 

Total revenues consisting of court approved Cause of Action settlements and interest increased to approximately $20.3 million for the nine months ended September 30, 2012 from approximately $382,000 for the nine months ended September 30, 2011. The increase of approximately $19.9 million was caused by an increase in settlement revenue related to the Buchanan Cause of Action for $20.0 million offset by a reduction in interest income of $0.1 million during the nine months ended September 30, 2012. There were no court approved settlements or related revenues for the nine months ended September 30, 2011.

 

Total operating expenses for the ART decreased to approximately $7.7 million for the nine months ended September 30, 2012 from approximately $8.1 million for the nine months ended September 30, 2011. The cost decrease of approximately $0.4 million was caused by a reduction in professional litigation costs of approximately $0.2 million, professional administrative costs of approximately $0.1 million and general and administrative costs of approximately $38,000.

 

Professional litigation costs decreased by approximately $0.2 million for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 due to decreased professional expenses for the Bank / Goldman, Buchanan, JV LIF and Prestige Causes of Action. The decreases were offset by increased costs for the FPL Cause of Action which went to trial in the second quarter of 2012.

 

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Table of Contents

 

Professional administrative costs decreased by approximately $0.1 million for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011. The decreased costs relate to decreased legal support costs incurred by the ART to manage trust operations, administrative requirements, Cause of Action oversight and regulatory compliance.

 

General and administrative costs decreased by approximately $38,000 for the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011. The ART experienced decreased costs of approximately $67,000 for bank fees, insurance premiums and tax filing costs and had offsetting increased costs of approximately $28,000 for SEC filing, audit and other administrative costs between the same comparable periods.

 

As a result of the increase in total revenues of approximately $19.9 million and the decrease in total operating expenses of approximately $0.4 million for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011, the net income of approximately $12.6 million for the nine months ended September 30, 2012 was approximately $20.3 million higher than the net loss for the nine months ended September 30, 2011.

 

Financial Condition and Cash Flows: Liquidity

 

The ART’s sources of liquidity are from (a) the $25.0 million transferred to the ART by Adelphia pursuant to the Plan on the Effective Date, (b) the successful resolution of Causes of Action and (c) earnings on invested cash balances. Receipts from these sources are used to pay professional and operating expenses of the ART and to fund Distributions to the Holders after reserving cash required to pay future professional and operating expenses of the ART. The Trustees regularly evaluate the future financial needs of the ART.  The Trustees will retain sufficient cash to administer the ART and fund the prosecution of the Causes of Action.

 

Based upon cash and cash equivalent balances as of September 30, 2012 totaling approximately $55.6 million along with expected expenses and other potential disbursements, the ART expects to meet its obligations as they come due during the next twelve months. Due to the uncertain nature of future revenues and expenses beyond twelve months, it is not possible to be certain that cash will be available to cover all the future financial needs of the ART. Incurring debt, creating contingent obligation agreements and seeking methods to reduce legal, professional and administrative costs are all strategies that could be undertaken to address liquidity issues should they arise. These strategies could impact the ART’s ability to maximize recoveries from settlements.

 

The nature of the ART’s operation does not give rise to capital expenditures and there are no current or expected commitments for capital expenditures in the next twelve months. Should a need for capital expenditures arise, the ART would fund the requirement from existing assets. Additionally, the ART currently has no long-term contracts or other long-term obligations.

 

Cash and cash equivalent balances at September 30, 2012 of approximately $55.6 million are $17.0 million lower than as of December 31, 2011. This decrease is due to cash and cash equivalents used by financing activities totaling $30.0 million offset by cash and cash equivalents provided by operating activities totaling $13.0 million.

 

The use of cash by financing activities was caused by a Distribution to Holders which occurred in the first quarter of 2012 for $30.0 million. The $13.0 million of cash provided by operating activities included net income for the nine months ended September 30, 2012 of approximately $12.6 million. Other operating activities include the accrual of interest on a note receivable of approximately $0.3 million, the paydown of accrued expenses of approximately $11,000 offset by the amortization of prepaid assets totaling $0.7 million for the nine months ended September 30, 2012.

 

As of September 30, 2012, the ART has a total of $55.6 million of cash and cash equivalents which include investments in three-month or shorter FDIC fully-insured bank CDs in the amount of $10.0 million, a U.S. Treasury and government agency securities money market fund in the amount of $41.8 million and deposit accounts in the amount of $3.8 million. The ART considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. As such, the three-month CDs have been classified as cash equivalents as of September 30, 2012. All investments during the quarter were fully compliant with the ART investment policy. The ART has adequate liquidity to meet its obligations as of September 30, 2012.

 

Debt and Other Long-term Obligations

 

The ART has no debt, capital or operating lease or other long-term obligations and has no current plans to incur such obligations.

 

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Table of Contents

 

Cautionary Statement Regarding Risks and Uncertainties That May Affect Future Results

 

This report on Form 10-Q contains forward-looking statements about the business, financial condition and prospects of the ART. The actual results of the ART could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties, including, without limitation, the number of and proceeds from litigations and/or settlements which are successful, delays in obtaining proceeds, the amount of funding required for the litigations and other operating expenses, economic conditions, changes in tax and other governmental rules and regulations applicable to the ART, and other risks identified and described in the Form 10-K filed with the SEC on March 9, 2012. These risks and uncertainties are beyond the ability of the ART to control, and in many cases, the ART cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this report the words “believes,” “estimates,” “plans,” “expects,” and “anticipates” and similar expressions as they relate to the ART or its management are intended to identify forward-looking statements.

 

Item 3

Quantitative and Qualitative Disclosures about Market Risk

 

 

The ART invests cash in either FDIC insured deposit accounts, FDIC insured bank CDs or a money market fund invested in short-term U.S. Treasury and government agency securities including repurchase agreements collateralized fully by U.S. Treasury and government agency securities. The CDs have 3 month or less maturity terms and as of September 30, 2012 the money market fund has a 45 day weighted average maturity for the underlying securities. Interest income from these investments is subject to interest rate fluctuations.

 

Item 4

Controls and Procedures

 

 

Evaluation of Disclosure Controls and Procedures

 

The ART maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that such information is accumulated and communicated to ART Trustees and the Trust Administrator as appropriate, to allow timely decisions regarding required financial disclosure.

 

The Trustees and the Trust Administrator have completed an evaluation of the effectiveness of the design and operation of disclosure controls and procedures as of September 30, 2012. Based on their evaluation, the Trustees and the Trust Administrator concluded that as of September 30, 2012, the ART’s disclosure controls and procedures were effective.

 

Limitations on the Effectiveness of Controls

 

The Trustees and the Trust Administrator do not expect that the ART’s disclosure controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the ART have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Changes in Internal Control over Financial Reporting

 

During the quarter ended September 30, 2012, there were no changes in the ART’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the ART’s internal control over financial reporting.

 

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Table of Contents

 

PART II

 

Item 1       Legal Proceedings

 

Causes of Action

 

Except as set forth below, there have been no material developments in the legal proceedings described in the ART’s Form 10-K as filed on March 9, 2012  or as updated in the ART’s Form 10-Q filed on May 11, 2012 and August 9, 2012.

 

Pending Causes of Action

 

Goldman Sachs Litigation

 

On July 6, 2003, the Creditors Committee filed a complaint in the Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) against Adelphia’s pre-petition commercial banks and lenders, Adelphia’s former investment bankers and financial advisors, and assignees of Adelphia’s pre-petition bank debt (the “Bank Litigation”).  On February 9, 2006, the United States District Court for the Southern District of New York (the “District Court”) granted a motion filed by certain defendants to withdraw the reference to the Bankruptcy Court. Pursuant to the Plan, the claims asserted in the Goldman Sachs Litigation were transferred to the ART.

 

The complaint included a claim for intentional fraudulent transfer against Goldman Sachs, Inc. arising from Adelphia’s pre-petition repayment of the Rigases’ personal margin loans in an amount of approximately $63.0 million.  On May 6, 2009, the Court denied Goldman Sachs’ motion to dismiss.  Goldman moved for summary judgment on March 2, 2010.  Following argument in August 2010, Goldman supplemented its motion on November 12, 2010.  On April 7, 2011, the District Court granted Goldman’s summary judgment motion and judgment was entered on April 13, 2011.  On May 6, 2011, the ART timely filed its notice of appeal to the Court of Appeals for the Second Circuit and subsequently filed an appeal. On April 25, 2012, the Second Circuit Court of Appeals heard oral argument on the appeal and took the case under advisement.

 

At this time, the ART cannot predict the outcome of the Goldman Sachs Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

FPL Litigation

 

On June 24, 2004, the Creditors’ Committee filed a fraudulent conveyance complaint against FPL Group, Inc. and West Boca Security, Inc. (collectively, “FPL”) in the Bankruptcy Court for the Southern District of New York relating to pre-petition transactions.  The FPL action seeks to recover an alleged fraudulent transfer arising out of Adelphia’s repurchase of certain of its stock from FPL in January 1999 for $149.5 million. Pursuant to the Plan, the claims asserted in the FPL Litigation were transferred to the ART.

 

On July 13, 2011, the Bankruptcy Court denied FPL’s motion for leave to amend its answer to add a new defense.  FPL filed an appeal of the Bankruptcy Court’s July 13, 2011 decision.  FPL’s appeal has been briefed by the parties and is under submission to the District Court.  On September 28, 2011, FPL moved to withdraw the reference to Bankruptcy Court.  The District Court denied FPL’s motion to withdraw the reference on January 30, 2012.  Trial began April 30, 2012 and testimony concluded on May 3, 2012.  The parties submitted post-trial briefs on June 22, 2012.  The Bankruptcy Court heard closing arguments on July 25, 2012.

 

At this time, the ART cannot predict the outcome of the FPL Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

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Table of Contents

 

Prestige Litigation

 

On June 24, 2004, the Creditors’ Committee filed an adversary action against Prestige Communications of NC, Inc., Jonathan J. Oscher, Lorraine Oscher McClain, Robert F. Buckfelder, Buckfelder Investment Trust, and Anverse, Inc. in the Bankruptcy Court for the Southern District of New York.  In a decision dated January 8, 2008, the District Court withdrew the reference to the Bankruptcy Court in the Prestige action and transferred the case to the District Court.

 

The Prestige action seeks to recover fraudulent transfers in connection with Adelphia’s purchase of the assets of Prestige Communications of N.C., Inc., an acquisition that closed on July 5, 2000, as well as a claim that the owners of the Prestige Cable Systems aided and abetted breaches of fiduciary duty on the part of the Rigas family in connection with the transaction.  Pursuant to the Plan, which became effective on February 13, 2007, the claims asserted in the Prestige Litigation were transferred to the ART.

 

On October 27, 2009, Defendants moved for summary judgment on the ART’s claims.  On June 27, 2011, the District Court granted Defendants’ summary judgment motion and judgment was entered on June 28, 2011.  The ART timely filed its notice of appeal to the Court of Appeals for the Second Circuit.  The parties are briefing the appeal.

 

At this time, the ART cannot predict the outcome of the Prestige Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

Avoidance Actions

 

On July 31, 2003, Adelphia and its debtor affiliates filed with the Bankruptcy Court their Statements of Financial Affairs, which included a schedule of payments to insider entities made within one year prior to Adelphia’s filing for bankruptcy and payments to non-insider entities made within ninety days prior to Adelphia’s filing for bankruptcy. Subsequently, Adelphia engaged in extensive analysis of all such payments to determine if they could be avoided pursuant to certain provisions of the Code.

 

On April 20, 2004, Adelphia filed a motion seeking to abandon most of the potential actions to avoid the pre-petition payments because, among other reasons, (i) Adelphia believed that pursuing certain of such actions against parties with whom Adelphia was continuing to do business could have a significant adverse impact on important, ongoing business relationships, and (ii) the costs associated with pursuing such actions far outweighed any potential benefit to the Adelphia debtors’ estates that might otherwise result from bringing such actions. In response to certain objections to Adelphia’s motion, Adelphia amended its initial motion.

 

On May 27, 2004, the Bankruptcy Court entered an order tolling all claims to avoid inter-debtor payments and authorizing the abandonment of potential actions to avoid (i) transfers to taxing authorities; (ii) transfers to human resource providers engaged in business with Adelphia; (iii) transfers determined to have been made in the ordinary course of business; and (iv) certain transfers deemed de minimis. As to the remainder of the transfers made by Adelphia during the relevant one-year and ninety-day periods prior to the bankruptcy filing, Adelphia either (i) entered into tolling agreements with the transferee extending Adelphia’s time to initiate an action, or (ii) filed a complaint and initiated an adversary proceeding against the transferee.

 

As of June 25, 2004, Adelphia secured approximately 250 tolling agreements with various transferees, including members of the Rigas family, the Rigas family entities, former executives James Brown and Michael Mulcahey, and former directors Erland Kailbourne, Dennis Coyle, Leslie Gelber, and Peter Metros, among others. Certain of these tolling agreements have been amended from time to time. In addition, Adelphia filed approximately 150 complaints in the Bankruptcy Court commencing actions to avoid certain pre-petition transfers and payments. Some of those complaints have since been dismissed or resolved after further investigation.

 

On July 21, 2004, the Bankruptcy Court stayed all activity in the avoidance actions commenced by Adelphia and approved notice and service procedures in connection therewith.

 

At this time, the ART cannot predict the outcome of these proceedings or estimate the possible financial effect of these proceedings on the ART’s financial statements.

 

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Table of Contents

 

Buchanan Ingersoll

 

On June 27, 2012, the ART announced that it had reached a settlement with Buchanan Ingersoll & Rooney PC (“Buchanan”), subject to the approval of the United States Bankruptcy Court.  On July 18, 2012, the Bankruptcy Court entered an order approving the settlement.  No objections or appeals were filed in the period allowed for appeals, and on August 1, 2012 the settlement became final.  Buchanan served as Adelphia’s primary outside legal counsel for a number of years before Adelphia filed for bankruptcy protection in June 2002.  Under the terms of the settlement, Buchanan made an initial payment of $20.0 million to the ART, which was released to the ART on August 3, 2012 and was recorded, under the terms of the ART’s revenue recognition policy, in the third quarter of 2012.

 

As part of the settlement, the ART agreed to participate with other parties that have asserted claims against Buchanan in a binding Alternate Dispute Resolution proceeding (the “ADR Proceeding”) in which an additional $40.0 million will be distributed. The ART and other parties have made their submissions in the ADR Proceedings and those submissions are under advisement.

 

At this time the ART cannot predict how much, if any, of the $40.0 million will be awarded to the ART or estimate the possible financial effect of the ADR Proceedings on the ART’s financial statements.

 

Item 1A.               Risk Factors

 

As of the date of this filing there have been no material changes from the risk factors previously disclosed in our “Risk Factors” in the ART’s Form 10-K for the year ended December 31, 2011 as filed with the SEC on March 9, 2012 or as updated in the ART’s Form 10-Q filed on May 11, 2012 and August 9, 2012.

 

Item 6       Exhibits

 

2.1*

First Modified Fifth Amended Joint Chapter 11 Plan of Reorganization of Adelphia Communications Corporation and Certain of its Affiliated Debtors, effective February 13, 2007

 

 

3.1*

Restated Certificate of Trust, dated February 13, 2007

 

 

3.2*

Amendment to Restated Certificate of Trust, dated March 15, 2007

 

 

3.3*

Second Amended and Restated Declaration of Trust, dated June 4, 2008

 

 

3.4*

Rules and Procedures of Adelphia Recovery Trust

 

 

4.1*

Form of Certificate Evidencing Undivided Beneficial Interests in the Assets of the Adelphia Recovery Trust (Global Certificate)

 

 

4.2*

Form of Certificate Evidencing Undivided Beneficial Interests in the Assets of the Adelphia Recovery Trust (Book Entry Certificate)

 

 

10.1*

Plan Administrator Agreement, dated February 12, 2007

 

 

10.2*

Trustee Compensation Agreement

 


*Incorporated by reference to the Form 10 of Adelphia Recovery Trust (File No. 000-53209) filed April 30, 2008 and the amended Form 10 filed July 2, 2008.

 

31.1

Section 302 Certification of Trustee

31.2

Section 302 Certification of Trust Administrator

32.1

Certification of Trustee pursuant to 18 U.S.C. 1350 Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002

32.2

Certification Trust Administrator pursuant to 18 U.S.C. 1350 Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002

101

The following materials from Adelphia Recovery Trust’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012, formatted in XBRL: (i) Condensed Balance Sheets (ii) Condensed Statements of Operations (iii) Condensed Statements of Cash Flows; and (iv) Notes to Condensed Financial Statements

 

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Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Date: November 9, 2012

 

 

 

By: Quest Turnaround Advisors, LLC

 

as Trust Administrator of the Adelphia Recovery Trust

 

/s/ Jeffrey A. Brodsky

 

Jeffrey A. Brodsky

 

Member

 

 

18