Document and Entity Information
Document and Entity Information - Jun. 30, 2015 - shares | Total |
Document and Entity Information | |
Entity Registrant Name | Adelphia Recovery Trust |
Entity Central Index Key | 1,433,669 |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2015 |
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 | 2,015 |
Document Fiscal Period Focus | Q2 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Assets | ||
Cash and cash equivalents | $ 35,257,356 | $ 36,323,412 |
Prepaid assets | 482,305 | 581,324 |
Note and accrued interest receivable | 5,745,216 | 5,604,966 |
Total assets | 41,484,877 | 42,509,702 |
Liabilities and net assets | ||
Accrued expenses | 74,360 | 83,412 |
Deferred holder distributions | 101,123 | 101,123 |
Total liabilities | 175,483 | 184,535 |
Net assets | 41,309,394 | 42,325,167 |
Total liabilities and net assets | $ 41,484,877 | $ 42,509,702 |
Condensed Statements of Operati
Condensed Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Revenues | ||||
Interest income | $ 80,059 | $ 106,056 | $ 158,910 | $ 211,281 |
Total revenues | 80,059 | 106,056 | 158,910 | 211,281 |
Operating expenses | ||||
General and administrative expenses | 321,885 | 311,079 | 1,010,726 | 997,684 |
Professional expenses | 80,973 | 55,517 | 163,957 | 158,961 |
Total operating expenses | 402,858 | 366,596 | 1,174,683 | 1,156,645 |
Net loss | $ (322,799) | $ (260,540) | $ (1,015,773) | $ (945,364) |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Operating activities | ||
Net loss | $ (1,015,773) | $ (945,364) |
Adjustments to reconcile net loss to net cash used by operating activities consisting of changes in operating assets and liabilities: | ||
Prepaid assets | 99,019 | 97,730 |
Note and accrued interest receivable | (140,250) | (195,010) |
Accrued expenses | (9,052) | 16,647 |
Net cash used by operating activities | (1,066,056) | (1,025,997) |
Net change in cash and cash equivalents | (1,066,056) | (1,025,997) |
Cash and cash equivalents, beginning of period | 36,323,412 | 36,081,284 |
Cash and cash equivalents, end of period | $ 35,257,356 | $ 35,055,287 |
Background
Background | 6 Months Ended |
Jun. 30, 2015 | |
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 and the Declaration of Trust for the ART, as amended (the “Declaration”), the ART is administered by five trustees (the “ Trustees ”) who are authorized to carry 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 a second motion to extend the term of the ART 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. On September 23, 2014 the Bankruptcy Court approved an extension through September 23, 2015. On August 13, 2015, the ART filed a further motion with the Bankruptcy Court to extend the term of the ART to December 31, 2016 in light of the current status of the Causes of Action. The motion also seeks the cancellation of certain Series of CVV Interests (“ Interests ”) as part of a staged wind-down process. A copy of the ART’s motion can be found at the Adelphia Recovery Trust Important Documents tab at adelphiarestructuring.com. The motion is currently pending before the Bankruptcy Court. The ART seeks the cancellation of certain CVV Interests as part of a staged wind-down process because (i) the ART Trustees strongly believe that Holders of Series ACC-4, Series ACC-6B, Series ACC-6D, Series ACC-6D1, Series ACC-6E/F, Series ACC-6E/F1, Series ACC-7 and Series ACC-7A will not recover any value on their interests (ii) the Series ESL, Series ACC-5 and Series ACC-6B1 have no Holders and (iii) cancellation of Series ACC-7 interests will result in the deregistration of the ART as a publicly reporting entity with the SEC, which will eliminate the expense associated with preparing such reports. The ART notes that the Interests that have Holders currently trade on the Over-the-Counter market. The Over-the-Counter market is an inter-dealer electronic quotation and trading system that does not require any action by or the consent of the issuer whose securities are traded. The ART cannot de-list from the Over-the-Counter market, does not have control over trading in the Interests on this market, has not taken any steps to facilitate such trading and is unable to prohibit individuals from trading. While trading in the Interests is occurring, the ART discourages trading of its Interests identified above in this market, because, as stated above, the ART Trustees strongly believe that Holders of such Interests will receive no value upon the distribution of assets or the dissolution of the ART. If the motion is granted the ART will comply with the Court’s order to cancel the Interests and trading in the Interests identified above should cease after cancellation. 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, 2015 | |
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, 2014 included in its Form 10-K filed with the Securities and Exchange Commission (“ SEC ”) on March 2, 2015. Interim results are not necessarily indicative of the results for the complete fiscal year. The condensed balance sheet as of December 31, 2014 was derived from the audited financial statements for the year then ended. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2015 | |
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, 2015 | |
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 2014 Form 10-K filed on March 2, 2015 and the filing of the ART’s Form 10-Q filed on May 4, 2015 are set forth below together with the material developments in those proceedings though the date of this filing. 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 District Court for the Southern District of New York accepted the Bankruptcy Court’s recommendations over the objections filed by the ART, and entered judgment in favor of FPL on March 20, 2015. After timely filing its Notice of Appeal, the ART filed its initial brief in the Second Circuit Court of Appeal on July 15, 2015. 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. 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 Instrum
Fair Value of Financial Instruments | 6 Months Ended |
Jun. 30, 2015 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | 5 Fair Value of Financial Instruments The ART was a party to the settlement between Leonard and Claire Tow and Adelphia. As a result of that settlement Adelphia agreed to pay the ART $4.875 million plus 8% simple interest when certain life insurance policies mature. A first to die rider in one of the insurance policies triggered a total payment of $2.1 million from Adelphia to the ART in October 2014. The $2.1 million was prorated between principal and interest as a partial payment of amounts outstanding at that time. 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 $5.1 million as of June 30, 2015 and $5.0 million as of December 31, 2014. The fair value was derived by discounting to June 30, 2015 and December 31, 2014 the projected maturity value of the note including accrued interest. The projected maturity value, including interest was 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 $5.7 million as of June 30, 2015 and approximately $5.6 million as of December 31, 2014 and were deemed to be fully collectable. The note bears 8% simple interest and is recourse only to the proceeds of various life insurance policies on Mr. Leonard Tow. |
Interest Holder Distribution
Interest Holder Distribution | 6 Months Ended |
Jun. 30, 2015 | |
Interest Holder Distribution | |
Interest Holder Distribution | 6 Interest Holder Distribution The Trustees have not authorized or completed any Distributions for the ART in 2015 or 2014. During 2013, previously issued ART Distributions reverted to the ART in the amount of approximately $101,000. 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 Declaration upon the dissolution of the ART. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2015 | |
Subsequent Events | |
Subsequent Events | 7 Subsequent Events Events subsequent to June 30, 2015 have been evaluated through August 14, 2015 , 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, 2015 | |
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, 2014 included in its Form 10-K filed with the Securities and Exchange Commission (“ SEC ”) on March 2, 2015. Interim results are not necessarily indicative of the results for the complete fiscal year. The condensed balance sheet as of December 31, 2014 was derived from the audited financial statements for the year then ended. |
Background (Details)
Background (Details) - 6 months ended Jun. 30, 2015 $ in Millions | USD ($)trusteeitem |
Related party transactions | |
Number of individual trustees | 5 |
Number of holders in interests in Series ESL and Series ACC-5 | item | 0 |
Adelphia | |
Related party transactions | |
Contribution from Adelphia for the purpose of pursuing the Causes of Action | $ | $ 25 |
Related Party Transactions (Det
Related Party Transactions (Details) | 6 Months Ended |
Jun. 30, 2015USD ($) | |
Trust Administrator and Adelphia | |
Related party transactions | |
Administrative support cost | $ 0 |
Pending Causes of Action (Detai
Pending Causes of Action (Details) $ in Millions | Jun. 25, 2004complaintagreement | Jun. 30, 2015USD ($) |
Causes of Action | ||
Number of tolling agreements with various transferees | agreement | 250 | |
Number of complaints in the Bankruptcy Court | complaint | 150 | |
Repurchase of stock | FPL Litigation | Pending litigation | ||
Causes of Action | ||
Amount sought or claimed under litigation | $ 149.5 |
Fair Value of Financial Instr16
Fair Value of Financial Instruments (Details) - USD ($) | 1 Months Ended | 6 Months Ended | |
Oct. 31, 2014 | Jun. 30, 2015 | Dec. 31, 2014 | |
Fair Value of Financial Instruments | |||
Carrying value of the note receivable and accrued interest | $ 5,745,216 | $ 5,604,966 | |
Mr. and Mrs. Leonard Tow | |||
Fair Value of Financial Instruments | |||
Carrying value of the note receivable and accrued interest | $ 4,875,000 | ||
Simple interest rate (as a percent) | 8.00% | ||
Proceeds of various life insurance policies | $ 2,100,000 | ||
Note receivable and accrued interest | |||
Fair Value of Financial Instruments | |||
Carrying value of the note receivable and accrued interest | $ 5,700,000 | 5,600,000 | |
Simple interest rate (as a percent) | 8.00% | ||
Note receivable and accrued interest | Level 3 | |||
Fair Value of Financial Instruments | |||
Fair value of the note receivable and accrued interest | $ 5,100,000 | $ 5,000,000 |
Interest Holder Distribution (D
Interest Holder Distribution (Details) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2015item | Dec. 31, 2014USD ($) | |
Interest Holder Distribution | ||
Amount distributed in cash to the holders of interests in the trust | $ 101,000 | |
Number of currently planned distributions | item | 0 |