NEW YORK -A bankruptcy judge in Manhattan agreed yesterday to block preferred shareholders from adding their own directors to the board of cable-television operator Adelphia Communications Corp.
U.S. Bankruptcy Judge Robert E. Gerber barred shareholders from acting until a later hearing on the matter.
Adelphia, the fifth-largest cable-television operator, had asked Gerber to halt preferred shareholders from trying to expand the company's nine-member board by as many as six directors before it emerges from bankruptcy. The company contends that adding directors would interfere with its reorganization plans.
Gerber ruled that there would be "substantial irreparable injury from the difficulty of unscrambling the eggs if new directors were put on the board."
The judge's ruling came in Adelphia's suit filed this week against two of the preferred shareholders, Talton R. Embry and Arthur H. Amron.
The dispute involves them and other holders of four series of preferred shares that were valued at $1.6 billion. Before the cable company's bankruptcy, shareholders had no voting rights unless Adelphia failed to pay dividends or comply with covenants on debt payments. If either happened, they were entitled to seek to elect up to six additional directors.
Holders of the Series B preferred shares demanded seats for Embry and Amron last month. Holders of Series E and F shares can demand two more seats tomorrow, and holders of Series D shares can demand seats in November, the suit said.
Embry is managing director of Magten Asset Management Corp. Amron is general counsel and a principal of Wexford Capital LLC. Magten and Wexford invest in distressed companies.
Adelphia's founder John J. Rigas, two of his sons and another executive have been indicted on charges that they defrauded the company of $2.5 billion.
The Securities and Exchange Commission and shareholders also are suing the company.