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Adelphia Communications Corporation

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Adelphia Communications Corporation
Credit Analysis
______________________________________________________________________________
Overview
We have performed a credit analysis on Adelphia Communications Corporation using information provided for the years 1992-1996. We compared Adelphia’s company practices to standard industry practices; evaluated its ability to repay debt; looked at Adelphia’s competitive position in the telecommunication industry; and evaluated its business strategy to grow and remain competitive within the industry.
We based our analysis and recommendations on key business risk issues as discussed in the following: a) business risks of the company and the industry; b) possible warning signs of trouble at Adelphia; c) assessment of the company’s financial capability to cover operating and debt obligations; and d) appropriateness of Adelphia’s financial strategy in correlation with the overall industry. Finally, we gave recommendations for Adelphia to consider in the event the company does not obtain the new bank loan.
Adelphia and the Industry
The industry is highly competitive and capital intensive. Growth is necessary to remain competitive. This requires upgrades of cable systems and expansion of services, such as internet and phone services. By acquiring existing cable networks, companies in the industry are able to forego some of the initial expense associated with expansion. Adelphia’s growth strategy primarily focuses on acquisition rather than on internal growth, and uses aggressive debt financing to keep up with the industry.
Heavy competition is not the only risk facing Adelphia. The company also faces unknowns as to how many franchises it will be awarded, the constantly changing regulations, and the future prospect of competition from telephone companies. All of these factors will impact Adelphia’s ability to operate in

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