NEW YORK (CNN/Money) -
Moody's Investors Service cut the debt rating of Adelphia Communications Corp. Wednesday as it warned that the troubled cable operator likely will file for bankruptcy protection soon and that any asset sales are unlikely.
Adelphia, which has $19.3 billion in rated debt, likely will have greater-than-expected credit losses under bankruptcy. The cable operator also will require greater debtor-in-possession financing than previously thought, Moody's said.
Moody's downgraded Adelphia's junk-rated senior unsecured debt of about $4.9 billion to Caa2 from Caa1, its fourth-lowest grade. The company's $1.6 billion in convertible subordinated notes also were cut to Ca, its second-lowest grade, from Caa2.
Last week, Adelphia failed to file its annual report, which caused the company to be booted off the Nasdaq stock market. The cable operator's stock now is being traded on pink sheets, a spokesman said earlier this week.
The delisting also triggered covenants in some of Adelphia's convertible bonds, forcing the company to buy back about $1.4 billion in convertible debt. On June 15, Adelphia also has $38 million in interest payments due, said Russell Solomon, senior vice president of the Moody's corporate finance group.
"We don't see any realistic scenario that will allow Adelphia to avoid seeking bankruptcy protection at this time," he said. "If they get over that [the $38 million] hurdle, then they still have the $1.4 billion issue to deal with," he said.
Moody's said Wednesday that any asset sales by Adelphia outside of bankruptcy court protection are increasingly unlikely since prospective buyers will need to know what they are buying and any contingent obligations. Last week, Charter Communications, which is controlled by Microsoft Corp. co-founder Paul Allen, dropped out of talks to buy Adelphia's Los Angeles assets.
The cable company also is looking for equity investments of about $1 billion. Moody's said Wednesday that private equity is available at some level.
Coudersport, Pa.-based Adelphia could not be reached for comment.