SAN FRANCISCO — A federal judge in Excite@Home’s Chapter 11 bankruptcy
proceeding has decided to postpone approving a bid by five cable
companies to keep
the cable service running another three months.
Judge Thomas Carlson is giving bondholders until Tuesday to look over
particulars of the $355 million agreement they find confusing. The judge
is clearly eager to get all parties involved in the deal, from creditors
and bondholders to the cable companies, to reach a compromise.
“There are some colorable claims by the bondholders,” the judge
said. “What we have here is a deal that almost everyone agrees on that
is
advantageous to the estate.”
The main sticking point with bondholders is a slew of complicated
release clauses including some $4 million in minor assets attached to
the @Home service.
@Home bondholders have, in spirit if not officially, agreed to the terms
of
the agreement. They also agree that AT&T Broadband/@Home services and
Charter Communications are not part of the contract extension, unless
they
want to “opt-in” to the agreement.
One of the attorney’s representing @Home bondholders said even though
most
of the extension agreement looks good on paper, some of the details use
what he calls “fuzzy logic.”
“We have no real opposition to the deal (in general) but we are
concerned
that the cable companies are spiking the ball in the end zone and
patting
themselves on the back,” he said. “We need to keep our eye on the
ball.”
@Home lawyer Robert White of O’Melveny & Myers and a host of other cable
representatives in on the deal said the deal “is what it is” and said
that bondholders cannot “have it both ways.”
@Home number-crunchers expect the broadband Internet service provider
(ISP)
to cost $50 million a month to operate, conservatively speaking. That
leaves $205 million to split between @Home bondholders and creditors.
Most of the ISPs equipment lessees were on hand Friday, to make sure
their
interests were voiced. Normally, equipment lenders are lower down the
food
chain than bondholders. While many do not expect the equipment lenders
to
get left out of the payout process, most were on hand to ensure they
came
away with something.
Today’s decision is critical for the five cable companies that agreed to
pitch in $355 million to keep @Home’s network up and running for another
three months. All are in the middle of hastily assembling a ISP service
to
replace the @Home network, a process that can take weeks to accomplish.
While several of the cable operators had already signed non-binding
agreements with @Home to continue cable services, as in the case of Cox
Communications, all bets are off when it comes to a ruling by the judge
in
a Chapter 11 bankruptcy filing.
Judge Thomas Carlson has already shown that he won’t consider the
inconvenience of temporary service interruption, as he has demonstrated
with his ruling to shut down AT&T’s @Home customers, which put
850,000
customers in the dark.
In its own defense, AT&T says it has finished moving some 850,000
former @ Home users to its network. The company acknowledged, however,
that some AT&T Broadband high-speed Internet customers have been
encountering difficulties in activating and connecting their computers
to the new network due to several causes.
Cox Communications, with its
recent
order for hundreds of Riverstone routers to handle Internet traffic,
is
still a couple months from extricating its roughly 550,000 Cox@Home
customers away from the failing service. That had a lot to do with
its
decision to pony up $160 million (Comcast Corp., with a deep customer
investment in @Home, also pitched in $160 million).
The other four cable operators Comcast Corp. ,
Insight
Communications , Mediacom Communications
and Mid Continent Communications are at similar stages in a
network build.
A network shutdown would make this week’s AT&T Broadband
@Home
shutdown look like a warmup. Of the 4.1 million North American @Home
subscribers, nearly two million of them fall under the umbrella of the
five
companies who agreed to pay up.
The judge did, however, give the green light to an asset sale of @Home
subsidiary MatchLogic.
In the case of MatchLogic, which was give
n
the axe in September, the judge agreed to split the data and
equipment
assets of the @Home subsidiary between General Motors Cyber Works and
Proctor & Gamble.
