Excite Creditors Seek Termination Of Cable Service

NEW YORK — A committee composed of Excite@Home Corp.’s largest creditors is asking a bankruptcy court to force the Internet company to stop providing service to its cable customers, in an attempt to get a better price for its assets, Monday’s Wall Street Journal reported.

In a filing late Friday with U.S. Bankruptcy Court for the Northern District in San Francisco, the committee said Excite@Home (ATHMQ) should “refuse to provide service unless the cable companies agree to much better terms or buy the company for a price acceptable to creditors.”

Excite@Home, which provides high-speed Internet service to the nation’s largest cable-television companies, filed for bankruptcy-court protection last month. AT&T Corp., a customer of Excite@Home and an owner of a controlling stake in it, said it would bid $307 million for the Redwood City, Calif., company’s assets.
Excite@Home and its cable partners, which also include Comcast Corp. and Cox Communications Inc., have pledged to avoid disrupting service.

Excite@Home’s creditors said the company won’t get a higher bid unless it rejects its existing contracts with its cable partners. The creditors, who hold about $747 million of bond claims against Excite@Home, said the pacts with the cable firms undervalue Excite@Home’s service. The only way to get a fair price, they said, is to terminate service and see what the cable partners are willing to pay to restart it.

Martin Bienenstock of Weil Gotshal&Manges in New York, an attorney for the bondholders, said his clients want new contracts with the cable companies “that would enable the company to pay its debts to all bondholders and trade creditors in full.” AT&T’s offer could leave bondholders with as little as five cents on the dollar, he said.

Two weeks ago, Excite@Home stopped accepting new customers from the cable companies, saying it was eating into its dwindling cash reserves. But last week, Excite reached an agreement with the cable providers that they would pay more to Excite@Home in exchange for the ability to accept new customers. Financial terms of the pact weren’t disclosed.

Also two weeks ago, the creditors’ committee, along with Excite@Home, asked AT&T to pay more than $1 billion for the Internet firm’s assets, according to people close to the situation. But while AT&T may bid a few million dollars more for the assets ultimately, people close to the telecom company said AT&T won’t offer anything close to $1 billion.

Excite@Home and AT&T declined to comment.

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