On Friday, Judge Thomas Carlson postponed his decision on whether to approve contracts with Cox Communications, Comcast, Mediacom and other cable companies. Earlier this week, Carlson said he would decide Friday.
Carlson said that postponing the ruling would give bondholders more time to determine releases of claims that Excite@Home may waive in exchange for the transition contracts with the cable partners. Under the agreements, Excite@Home would receive $355 million to maintain the service through February and would help switch customers from Excite@Home's network to the cable companies' own networks.
"I don't have a record now and need one to approve the settlement. I need substantial information from Excite@Home, and the bondholders will need time to review it," Carlson said.
Bondholders attending the hearing Friday said they didn't necessarily oppose the new transition agreements, but they said they didn't clearly understand the details of what Excite@Home proposes in the releases.
"First we have to understand it before we can negotiate it," said Bill Weintraub, an attorney for the San Francisco offices of Pachulski, Stang, Ziehl, Young & Jones, which represents the bondholders committee.
According to courtroom testimony, the releases waive such claims as payouts on distribution agreements. Excite@Home is expected to submit a declaration on how it structured the transition agreements and what is and is not included in the releases on Monday. On Tuesday, all parties will return to the courtroom for the judge's decision.
But some creditors say the bondholders continue to play a dangerous game of chicken with Excite@Home, noting that previous delays have not worked out in favor of creditors. Some creditors in the courtroom on Friday wanted the judge to approve the transition contracts now on the table--without delay.
"We believe the price is fair and this agreement is in the best interest of the estate," said Rebecca Litteneker, an attorney representing the general unsecured creditors for San Francisco-based McNutt & Litteneker.
Geraldine Freeman, an attorney representing the equipment lessors, said her contingent was satisfied with the agreement.
"The deal is quite favorable to the estate...and we believe the bondholders are engaging in a high-risk strategy," Freeman said. She estimated the equipment lessors are owed $10 million for each month that has passed.
Speed is of the essence
Getting the contracts finalized quickly could help boost the returns to creditors; the value of Excite@Home erodes daily. The Redwood City, Calif.-based high-speed Internet provider had 4.1 million customers only one week ago, but its customer list has dwindled since then.
Cable companies began migrating customers from the Excite@Home network to their own networks last weekend, only hours after Carlson ruled that Excite@Home could renegotiate contracts with cable companies. Instead of crafting long-term agreements, the cable companies opted to forge deals that last no longer than it takes to move customers from the @Home network to independent networks.
Almost all of Excite@Home's cable partners are expected to migrate their customers or find new network providers within three months.
The pending court approval is just one of many issues the once high-flying high-speed Internet access company hopes to resolve as it winds down its operations for a Feb. 28 closure. It is also laying off its staff and handling calls from customers, who are worried about their service and, in some cases, upset about lost e-mail and changed addresses.
Determining how much money Excite@Home collects from cable companies could put an end to a series of lawsuits and animosity from creditors to bondholders.
The bondholders are upset that AT&T, which controls a 79 percent voting interest in Excite@Home, rescinded its $307 million bid to purchase Excite@Home's assets. AT&T spokeswoman Eileen Connolly said AT&T executives informed Excite@Home CEO Patti Hart about the decision to withdraw the offer late Monday.
Creditors had previously tried to stall the AT&T purchase because they thought AT&T's bid was as much as $700 million less than the value of the company's assets--including a subscriber list of 4.1 million broadband customers. But the cable companies have migrated at least half those customers to their own networks.
On Friday morning, AT&T Broadband Internet announced that it had migrated 850,000 customers to the AT&T network. But as many as 10,000 customers in Colorado and Pennsylvania were still completely without high-speed connections, said AT&T spokeswoman Sarah Eder, and many customers have complained that service on the new network is exceedingly slow.
Bondholders and other unsecured creditors will receive whatever remains of that $355 million when the company dissolves in late February.
In courtroom testimony Friday, attorneys estimated that Excite@Home would spend $150 million over the next three months to maintain service to customers, based on the current size of its operations. That would eventually leave an estimated $205 million for creditors and bondholders. The company also has roughly $200 million in cash.