Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended |
Jun. 30, 2014 | |
Document and Entity Information | ' |
Entity Registrant Name | 'Adelphia Recovery Trust |
Entity Central Index Key | '0001433669 |
Document Type | '10-Q |
Document Period End Date | 30-Jun-14 |
Amendment Flag | 'false |
Current Fiscal Year End Date | '--12-31 |
Entity Current Reporting Status | 'Yes |
Entity Filer Category | 'Smaller Reporting Company |
Entity Common Stock, Shares Outstanding | 0 |
Document Fiscal Year Focus | '2014 |
Document Fiscal Period Focus | 'Q2 |
Condensed_Balance_Sheets
Condensed Balance Sheets (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Assets | ' | ' |
Cash and cash equivalents | $35,055,287 | $36,081,284 |
Prepaid assets | 541,468 | 639,198 |
Note and accrued interest receivable | 7,533,886 | 7,338,876 |
Total assets | 43,130,641 | 44,059,358 |
Liabilities and net assets | ' | ' |
Accrued expenses | 87,989 | 71,342 |
Deferred holder distributions | 99,979 | 99,979 |
Total liabilities | 187,968 | 171,321 |
Net assets | 42,942,673 | 43,888,037 |
Total liabilities and net assets | $43,130,641 | $44,059,358 |
Condensed_Statements_of_Operat
Condensed Statements of Operations (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Revenues | ' | ' | ' | ' |
Interest income | $106,056 | $106,562 | $211,281 | $209,666 |
Total revenues | 106,056 | 106,562 | 211,281 | 209,666 |
Operating expenses | ' | ' | ' | ' |
General and administrative expenses | 311,079 | 352,983 | 997,684 | 1,049,553 |
Professional expenses - litigation | -8,992 | -3,854 | 9,386 | 4,046 |
Professional expenses - administrative | 64,509 | 62,529 | 149,575 | 138,436 |
Total operating expenses | 366,596 | 411,658 | 1,156,645 | 1,192,035 |
Net loss | ($260,540) | ($305,096) | ($945,364) | ($982,369) |
Condensed_Statements_of_Cash_F
Condensed Statements of Cash Flows (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Operating activities | ' | ' |
Net loss | ($945,364) | ($982,369) |
Adjustments to reconcile net loss to net cash used by operating activities consisting of changes in operating assets and liabilities: | ' | ' |
Prepaid assets | 97,730 | -168,463 |
Note and accrued interest receivable | -195,010 | -194,989 |
Accrued expenses | 16,647 | -297,996 |
Net cash used by operating activities | -1,025,997 | -1,643,817 |
Financing activities | ' | ' |
Interest Holder Distributions | ' | 10,109 |
Net cash provided by financing activities | ' | 10,109 |
Net change in cash and cash equivalents | -1,025,997 | -1,633,708 |
Cash and cash equivalents, beginning of period | 36,081,284 | 38,500,583 |
Cash and cash equivalents, end of period | $35,055,287 | $36,866,875 |
Background
Background | 6 Months Ended |
Jun. 30, 2014 | |
Background | ' |
Background | ' |
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 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”). | |
The Plan provides that the ART shall dissolve upon the earlier of the distribution of all of its assets to the Holders or the fifth anniversary of its creation which was on February 13, 2012, subject to the right of the Trustees to extend the ART’s term with the approval of the Bankruptcy Court. In November 2011, the ART filed a motion to extend the term of the ART through December 31, 2014 because several Causes of Action were unlikely to be resolved prior to February 13, 2012. In December 2011 the motion was granted by the Bankruptcy Court. In July 2014, the ART filed another motion to extend the term of the ART through December 31, 2016 in light of the current status of the Causes of Action and the administrative tasks to be performed after the Causes of Action are resolved. As of the date of this filing, that motion is pending before the Bankruptcy Court. The Bankruptcy Court may approve additional extensions to resolve the Causes of Action, distribute the net proceeds to Holders or complete the administration of the ART. | |
Basis_of_Presentation
Basis of Presentation | 6 Months Ended |
Jun. 30, 2014 | |
Basis of Presentation | ' |
Basis of Presentation | ' |
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 (“US GAAP”) for interim periods 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, 2013 included in its Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 12, 2014. Interim results are not necessarily indicative of the results for the complete fiscal year. The condensed balance sheet as of December 31, 2013 was derived from the audited financial statements for the year then ended. | |
Related_Party_Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2014 | |
Related Party Transactions | ' |
Related Party Transactions | ' |
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. | |
Pending_Causes_of_Action
Pending Causes of Action | 6 Months Ended |
Jun. 30, 2014 | |
Pending Causes of Action | ' |
Pending Causes of Action | ' |
4 Pending Causes of Action | |
The material developments in the legal proceedings since those described in the ART’s 2013 Form 10-K filed on March 12, 2014 and the filing of the ART’s Form 10-Q filed on May 14, 2014 as well as the current status of the ART’s pending causes of action are set forth below. | |
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. On April 4, 2014, the Second Circuit affirmed the District Court’s summary judgment in favor of Goldman Sachs. The ART determined not to seek a rehearing before the Second Circuit or file a petition for writ of certiorari with the United States Supreme Court. | |
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, which was denied September 18, 2012. 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. On May 6, 2014, the Bankruptcy Court issued proposed Findings of Fact and Conclusions of Law (the “Proposed Findings”), which recommend that the District Court enter judgment in favor of FPL. The Bankruptcy Court’s proposed Findings of Fact and Conclusions of Law will be reviewed by the District Court under a de novo standard of review before a judgment is entered. The Trust filed an Objection to the Court’s Proposed Findings on June 10, 2014, and that Objection has been fully briefed by the parties. The matter is now pending before District Court Judge Valerie Caproni. | |
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. | |
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 appeal has not been briefed while the parties await a decision on Defendants’ motion to seal appellate filings. | |
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. Most of those complaints have since been dismissed or resolved after further investigation. | |
At this time, the ART cannot predict the outcome of the remaining claims or estimate the possible financial effect of these proceedings on the ART’s financial statements. | |
Fair_Value_of_Financial_Instru
Fair Value of Financial Instruments | 6 Months Ended |
Jun. 30, 2014 | |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments | ' |
5 Fair Value of Financial Instruments | |
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 June 30, 2014 and $5.8 million as of December 31, 2013. The fair value was derived by discounting to June 30, 2014 and December 31, 2013 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 discount rate was less than the interest rate on the note during the second quarter of 2014. | |
The carrying values were approximately $7.5 million as of June 30, 2014 and approximately $7.3 million as of December 31, 2013. 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 $27 million. | |
In July 2014, a partial maturity of the insurance policies occurred. As a result of this event Adelphia expects to receive proceeds of approximately $2.1 million from the Tow Trust which will be used as a partial payment of the note and accrued interest receivable in the third or fourth quarter of 2014. | |
Interest_Holder_Distribution
Interest Holder Distribution | 6 Months Ended |
Jun. 30, 2014 | |
Interest Holder Distribution | ' |
Interest Holder Distribution | ' |
6 Interest Holder Distribution | |
The Trustees have not authorized or completed any Distributions for the ART in 2014 or 2013. During 2013, previously issued ART Distributions reverted to the ART in the amount of approximately $100,000. These funds were returned to the ART in accordance with Plan provisions regarding unclaimed Distributions and have been recorded as a deferred holder distributions liability. Such funds have reverted to the ART for the benefit of Interest Holders in the class of the forfeiting Holders and will be distributed to such Interest Holders at a time determined by the Trustees. | |
The ART Trustees will continue to retain cash in reserve to administer the ART and fund the prosecution of the Causes of Action and will continue to assess the adequacy of funds held for all potential costs and expenses of the ART and will distribute ART excess assets, if any, to Holders. No Distributions are currently planned. If and when future Distributions occur, they will be made according to the waterfall priority established in the Plan and discussed herein. Any assets not previously distributed by the ART, and that are not required for remaining costs and expenses, will be distributed in accordance with the Trust Declaration upon the dissolution of the ART. | |
Subsequent_Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2014 | |
Subsequent Events | ' |
Subsequent Events | ' |
7 Subsequent Events | |
Events subsequent to June 30, 2014 have been evaluated through August 12, 2014, the date the accompanying financial statements were issued. Other than as discussed herein, 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. | |
Basis_of_Presentation_Policies
Basis of Presentation (Policies) | 6 Months Ended |
Jun. 30, 2014 | |
Basis of Presentation | ' |
Basis of Presentation | ' |
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 (“US GAAP”) for interim periods 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, 2013 included in its Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 12, 2014. Interim results are not necessarily indicative of the results for the complete fiscal year. The condensed balance sheet as of December 31, 2013 was derived from the audited financial statements for the year then ended. | |
Background_Details
Background (Details) (USD $) | 6 Months Ended |
In Millions, unless otherwise specified | Jun. 30, 2014 |
trustee | |
Related party transactions | ' |
Number of individual trustees | 5 |
Adelphia Communications Corporation [Member] | ' |
Related party transactions | ' |
Contribution from Adelphia for the purpose of pursuing the Causes of Action | 25 |
Related_Party_Transactions_Det
Related Party Transactions (Details) (Quest Turnaround Advisors LLC and Adelphia Communications Corporation [Member], USD $) | 6 Months Ended |
Jun. 30, 2014 | |
Quest Turnaround Advisors LLC and Adelphia Communications Corporation [Member] | ' |
Related party transactions | ' |
Administrative support cost | $0 |
Pending_Causes_of_Action_Detai
Pending Causes of Action (Details) (USD $) | 0 Months Ended | 6 Months Ended | |
In Millions, unless otherwise specified | Jun. 25, 2004 | Jun. 30, 2014 | Jun. 30, 2014 |
agreement | Personal Margin Loans [Member] | Repurchase of Stock [Member] | |
complaint | Goldman Sachs Litigation [Member] | FPL Litigation [Member] | |
Pending Litigation [Member] | Pending Litigation [Member] | ||
Causes of Action | ' | ' | ' |
Amount sought or claimed under litigation | ' | $63 | $149.50 |
Number of tolling agreements with various transferees | 250 | ' | ' |
Number of complaints in the Bankruptcy Court | 150 | ' | ' |
Fair_Value_of_Financial_Instru1
Fair Value of Financial Instruments (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Jul. 31, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 |
Mr and Mrs Leonard Tow [Member] | Mr and Mrs Leonard Tow [Member] | Notes Receivable [Member] | Notes Receivable [Member] | Notes Receivable [Member] | Notes Receivable [Member] | |||
Subsequent Event [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Inputs, Level 3 [Member] | ||||||
Fair Value of Financial Instruments | ' | ' | ' | ' | ' | ' | ' | ' |
Fair value of the note receivable and accrued interest | ' | ' | ' | ' | ' | ' | $6,000,000 | $5,800,000 |
Carrying value of the note receivable and accrued interest | 7,533,886 | 7,338,876 | ' | ' | 7,500,000 | 7,300,000 | ' | ' |
Simple interest rate (as a percent) | ' | ' | ' | ' | 8.00% | ' | ' | ' |
Proceeds of various life insurance policies | ' | ' | $27,000,000 | $2,100,000 | ' | ' | ' | ' |
Interest_Holder_Distribution_D
Interest Holder Distribution (Details) (USD $) | 12 Months Ended | 18 Months Ended |
Dec. 31, 2013 | Jun. 30, 2014 | |
item | ||
Interest Holder Distribution | ' | ' |
Amount distributed in cash to the holders of interests in the trust | $100,000 | ' |
Number of currently planned distributions | ' | 0 |