0001104659-14-038463.txt : 20140514 0001104659-14-038463.hdr.sgml : 20140514 20140514110050 ACCESSION NUMBER: 0001104659-14-038463 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20140331 FILED AS OF DATE: 20140514 DATE AS OF CHANGE: 20140514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Adelphia Recovery Trust CENTRAL INDEX KEY: 0001433669 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 116615508 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-53209 FILM NUMBER: 14839865 BUSINESS ADDRESS: STREET 1: 919 NORTH MARKET STREET STREET 2: FLOOR 17, P.O. BOX 705 CITY: WILMINGTON STATE: DE ZIP: 19899 BUSINESS PHONE: 302-652-4100 MAIL ADDRESS: STREET 1: 919 NORTH MARKET STREET STREET 2: FLOOR 17, P.O. BOX 705 CITY: WILMINGTON STATE: DE ZIP: 19899 10-Q 1 a14-9636_110q.htm 10-Q

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2014

 

or

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                    to                   

 

Commission File Number: 000-53209

 

Adelphia Recovery Trust

(Exact name of registrant as specified in its charter)

 

Delaware

 

11-6615508

(State or other jurisdiction of incorporation or

 

(I.R.S. Employer Identification No.)

organization)

 

 

 

919 North Market Street, 17th Floor, PO Box 8705

Wilmington, Delaware 19899

(Address of principal executive offices) (Zip Code)

 

302-652-4100 Attn: Dean Ziehl

(Registrant’s telephone number, including area code)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company x

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes o  No o

 

 

 



Table of Contents

 

ADELPHIA RECOVERY TRUST

FORM 10-Q

INDEX

 

PART I — FINANCIAL INFORMATION

3

 

 

 

 

ITEM 1. FINANCIAL STATEMENTS (unaudited)

3

 

 

 

 

Condensed Balance Sheets as of March 31, 2014 and December 31, 2013

3

 

 

 

 

Condensed Statements of Operations for the three months ended March 31, 2014 and 2013

4

 

 

 

 

Condensed Statements of Cash Flows for the three months ended March 31, 2014 and 2013

5

 

 

 

 

Notes to Condensed Financial Statements

6

 

 

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

9

 

 

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

15

 

 

 

 

ITEM 4. CONTROLS AND PROCEDURES

15

 

 

 

PART II

16

 

 

 

 

ITEM 1. LEGAL PROCEEDINGS

16

 

 

 

 

ITEM 1A. RISK FACTORS

18

 

 

 

 

ITEM 6. EXHIBITS

19

 

 

 

SIGNATURES

20

 

 

CERTIFICATIONS

 

 

2



Table of Contents

 

PART 1 - FINANCIAL INFORMATION

 

Item 1                                    Financial Statements

 

Adelphia Recovery Trust

Condensed Balance Sheets

 

 

 

As of

 

As of

 

 

 

March 31, 2014

 

December 31, 2013

 

 

 

(Unaudited)

 

(Note 2)

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

35,397,903

 

$

36,081,284

 

Prepaid assets

 

605,803

 

639,198

 

Note and accrued interest receivable

 

7,436,381

 

7,338,876

 

Total assets

 

$

43,440,087

 

$

44,059,358

 

 

 

 

 

 

 

Liabilities and net assets

 

 

 

 

 

Accrued expenses

 

$

136,895

 

$

71,342

 

Deferred holder distributions

 

99,979

 

99,979

 

 

 

 

 

 

 

Total liabilities

 

236,874

 

171,321

 

 

 

 

 

 

 

Net assets

 

43,203,213

 

43,888,037

 

 

 

 

 

 

 

Total liabilities and net assets

 

$

43,440,087

 

$

44,059,358

 

 

See accompanying notes to condensed financial statements.

 

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Adelphia Recovery Trust

Unaudited Condensed Statements of Operations

 

 

 

For the three
months ended
March 31, 2014

 

For the three
months ended
March 31, 2013

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

105,224

 

$

103,104

 

Total revenues

 

105,224

 

103,104

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

General and administrative expenses

 

686,604

 

696,570

 

Professional expenses - litigation

 

18,378

 

7,900

 

Professional expenses - administrative

 

85,066

 

75,907

 

Total operating expenses

 

790,048

 

780,377

 

 

 

 

 

 

 

Net loss

 

$

(684,824

)

$

(677,273

)

 

See accompanying notes to condensed financial statements

 

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Adelphia Recovery Trust

Unaudited Condensed Statements of Cash Flows

 

 

 

For the
three months
ended
March 31, 2014

 

For the
three months
ended
March 31, 2013

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Net loss

 

$

(684,824

)

$

(677,273

)

Adjustments to reconcile net loss to net cash used by operating activities consisting of changes in operating assets and liabilities:

 

 

 

 

 

Prepaid assets

 

33,395

 

(251,777

)

Note and accrued interest receivable

 

(97,505

)

(97,484

)

Accrued expenses

 

65,553

 

(259,326

)

Net cash used by operating activities

 

(683,381

)

(1,285,860

)

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(683,381

)

(1,285,860

)

Cash and cash equivalents, beginning of period

 

36,081,284

 

38,500,583

 

Cash and cash equivalents, end of period

 

$

35,397,903

 

$

37,214,723

 

 

See accompanying notes to condensed financial statements.

 

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ADELPHIA RECOVERY TRUST

 

Notes to Condensed Financial Statements — March 31, 2014 (Unaudited)

 

1                                                                                                                                         Background

 

The Adelphia Recovery Trust (the “ART”) was formed as a Delaware statutory trust pursuant to that certain First Modified Fifth Amended Joint Chapter 11 Plan of Reorganization (the “Plan”) of Adelphia Communications Corporation (“Adelphia” or “ACC”) and certain of its subsidiaries (collectively the “Debtor”). The purpose of the ART is to prosecute the various causes of action transferred to the ART pursuant to the Plan (the “Causes of Action”) and distribute to the owners (the “Holders”) of the interests in the ART (“Interests”) the net proceeds of such Causes of Action (“Distributions”), according to the relative priorities established pursuant to the Plan, subject to the retention of various amounts to fund the prosecution of those Causes of Action and operations of the ART. Pursuant to the Plan, in addition to the Causes of Action, Adelphia transferred $25 million in cash to the ART, in connection with its formation, in order to fund the initial expenses of operation.

 

As set forth in the Plan, the ART is administered by five trustees (the “Trustees”) who are responsible for carrying out the purposes of the ART. Quest Turnaround Advisors, L.L.C. (“Quest”) is the plan administrator (in such capacity, the “Plan Administrator”) of Adelphia. Quest and Adelphia together have agreed to provide certain administrative services to the ART. In order to facilitate the provision of such administrative services, the ART has appointed Quest as the trust administrator of the ART (in such capacity, the “Trust Administrator”).

 

2                                                                                                                                         Basis of Presentation

 

The accompanying interim unaudited condensed financial statements of the ART have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim periods and with the instructions to Form 10-Q.  As such, they do not include all of the information and disclosures required by US GAAP for complete financial statements.  In the opinion of the Trustees, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the interim unaudited condensed financial statements have been included. These condensed financial statements should be read in conjunction with the ART’s audited financial statements for the year ended December 31, 2013 included in its Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 12, 2014. Interim results are not necessarily indicative of the results for the complete fiscal year. The condensed balance sheet as of December 31, 2013 was derived from the audited financial statements for the year then ended.

 

3                                                                                                                                         Related Party Transactions

 

The Trust Administrator and Adelphia continue to provide administrative support to the ART including maintaining electronic data and paper documents used in prosecuting the Causes of Action, financial reporting and support for Distributions when they might occur (including maintenance of data related to the implementation of Plan provisions). These services have and will continue to be provided at no cost to the ART under the terms of various agreements between the Trust Administrator and Adelphia. The ART financial statements do not reflect any amounts for these services.

 

4                                                                                                                                         Pending Causes of Action

 

There have been material developments in the legal proceedings described in the ART’s 2013 Form 10-K since the filing on March 12, 2014.  For convenience, the current status of the ART’s pending causes of action is set forth below.

 

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Goldman Sachs Litigation

 

On July 6, 2003, the Creditors Committee filed a complaint in the Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) against Adelphia’s pre-petition commercial banks and lenders, Adelphia’s former investment bankers and financial advisors, and assignees of Adelphia’s pre-petition bank debt (the “Bank Litigation”).  On February 9, 2006, the United States District Court for the Southern District of New York (the “District Court”) granted a motion filed by certain defendants to withdraw the reference to the Bankruptcy Court. Pursuant to the Plan, the claims asserted in the Goldman Sachs Litigation were transferred to the ART.

 

The complaint included a claim for intentional fraudulent transfer against Goldman Sachs, Inc. arising from Adelphia’s pre-petition repayment of the Rigases’ personal margin loans in an amount of approximately $63.0 million.  On May 6, 2009, the Court denied Goldman Sachs’ motion to dismiss.  Goldman moved for summary judgment on March 2, 2010.  Following argument in August 2010, Goldman supplemented its motion on November 12, 2010.  On April 7, 2011, the District Court granted Goldman’s summary judgment motion and judgment was entered on April 13, 2011.  On May 6, 2011, the ART timely filed its notice of appeal to the Court of Appeals for the Second Circuit and subsequently filed an appeal. On April 25, 2012, the Second Circuit Court of Appeals heard oral argument on the appeal and took the case under advisement.  On April 4, 2014, the Second Circuit affirmed the District Court’s summary judgment in favor of Goldman Sachs.  No motion for rehearing or petition for writ of certiorari has been filed, as of the date of the filing of this report.

 

At this time, the ART cannot predict the outcome of the Goldman Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

FPL Litigation

 

On June 24, 2004, the Creditors’ Committee filed a fraudulent conveyance complaint against FPL Group, Inc. and West Boca Security, Inc. (collectively, “FPL”) in the Bankruptcy Court for the Southern District of New York relating to pre-petition transactions.  The FPL action seeks to recover an alleged fraudulent transfer arising out of Adelphia’s repurchase of certain of its stock from FPL in January 1999 for $149.5 million. Pursuant to the Plan, the claims asserted in the FPL Litigation were transferred to the ART.

 

On July 13, 2011, the Bankruptcy Court denied FPL’s motion for leave to amend its answer to add a new defense.  FPL filed an appeal of the Bankruptcy Court’s July 13, 2011 decision, which was denied September 18, 2012.  On September 28, 2011, FPL moved to withdraw the reference to Bankruptcy Court.  The District Court denied FPL’s motion to withdraw the reference on January 30, 2012.  Trial began April 30, 2012 and testimony concluded on May 3, 2012.  The parties submitted post-trial briefs on June 22, 2012.  The Bankruptcy Court heard closing arguments on July 25, 2012. On May 6, 2014 the Bankruptcy Court issued proposed Findings of Facts and Conclusions of Law, which recommended that the District Court enter judgment in favor of FPL. The Bankruptcy Court’s proposed Findings of Facts and Conclusions of Law will be reviewed by the District Court under a de novo standard of review before a judgment is entered.

 

At this time, the ART cannot predict the outcome of the FPL Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

Prestige Litigation

 

On June 24, 2004, the Creditors’ Committee filed an adversary action against Prestige Communications of NC, Inc., Jonathan J. Oscher, Lorraine Oscher McClain, Robert F. Buckfelder, Buckfelder Investment Trust, and Anverse, Inc. in the Bankruptcy Court for the Southern District of New York.  In a decision dated January 8, 2008, the District Court withdrew the reference to the Bankruptcy Court in the Prestige action and transferred the case to the District Court.

 

The Prestige action seeks to recover fraudulent transfers in connection with Adelphia’s purchase of the assets of Prestige Communications of N.C., Inc., an acquisition that closed on July 5, 2000, as well as a claim that the owners of the Prestige Cable Systems aided and abetted breaches of fiduciary duty on the part of the Rigas family in connection with the transaction.  Pursuant to the Plan, which became effective on February 13, 2007, the claims asserted in the Prestige Litigation were transferred to the ART.

 

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On October 27, 2009, Defendants moved for summary judgment on the ART’s claims.  On June 27, 2011, the District Court granted Defendants’ summary judgment motion and judgment was entered on June 28, 2011.  The ART timely filed its notice of appeal to the Court of Appeals for the Second Circuit.  The appeal is being briefed.

 

At this time, the ART cannot predict the outcome of the Prestige Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

Avoidance Actions

 

On July 31, 2003, Adelphia and its debtor affiliates filed with the Bankruptcy Court their Statements of Financial Affairs, which included a schedule of payments to insider entities made within one year prior to Adelphia’s filing for bankruptcy and payments to non-insider entities made within ninety days prior to Adelphia’s filing for bankruptcy. Subsequently, Adelphia engaged in extensive analysis of all such payments to determine if they could be avoided pursuant to certain provisions of the Code.

 

On April 20, 2004, Adelphia filed a motion seeking to abandon most of the potential actions to avoid the pre-petition payments because, among other reasons, (i) Adelphia believed that pursuing certain of such actions against parties with whom Adelphia was continuing to do business could have a significant adverse impact on important, ongoing business relationships, and (ii) the costs associated with pursuing such actions far outweighed any potential benefit to the Adelphia debtors’ estates that might otherwise result from bringing such actions. In response to certain objections to Adelphia’s motion, Adelphia amended its initial motion.

 

On May 27, 2004, the Bankruptcy Court entered an order tolling all claims to avoid inter-debtor payments and authorizing the abandonment of potential actions to avoid (i) transfers to taxing authorities; (ii) transfers to human resource providers engaged in business with Adelphia; (iii) transfers determined to have been made in the ordinary course of business; and (iv) certain transfers deemed de minimis. As to the remainder of the transfers made by Adelphia during the relevant one-year and ninety-day periods prior to the bankruptcy filing, Adelphia either (i) entered into tolling agreements with the transferee extending Adelphia’s time to initiate an action, or (ii) filed a complaint and initiated an adversary proceeding against the transferee.

 

As of June 25, 2004, Adelphia secured approximately 250 tolling agreements with various transferees, including members of the Rigas family, the Rigas family entities, former executives James Brown and Michael Mulcahey, and former directors Erland Kailbourne, Dennis Coyle, Leslie Gelber, and Peter Metros, among others. Certain of these tolling agreements have been amended from time to time. In addition, Adelphia filed approximately 150 complaints in the Bankruptcy Court commencing actions to avoid certain pre-petition transfers and payments. Most of those complaints have since been dismissed or resolved after further investigation.

 

At this time, the ART cannot predict the outcome of the remaining claims or estimate the possible financial effect of these proceedings on the ART’s financial statements.

 

5                                                                                                                                         Fair Value of Financial Instruments

 

The ART had no temporary investments as of March 31, 2014 or December 31, 2013.

 

The fair value of the note receivable and accrued interest has been determined using unobservable inputs (i.e. Level 3, as defined in Accounting Standards Codification 820-10) and approximates $5.8 million as of March 31, 2014 and December 31, 2013. The fair value was derived by discounting to March 31, 2014 and December 31, 2013 the projected maturity value of the note including accrued interest. The projected maturity values, including interest were calculated using life expectancy tables. The discount rate is based on the yield on the notes issued by the life insurance companies underwriting the life insurance policies and various risk factors associated with the note. The discount rate approximated the interest rate on the note during the first quarter of 2014.

 

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Table of Contents

 

The carrying values were approximately $7.4 million as of March 31, 2014 and approximately $7.3 million as of December 31, 2013. The note bears 8% simple interest and is recourse only to the proceeds of various life insurance policies on Mr. and Mrs. Leonard Tow totaling approximately $27 million.

 

6                                                                                                                                         Interest Holder Distribution

 

The Trustees have not authorized or completed any Distributions for the ART in 2014 or 2013. During 2013, previously issued ART Distributions reverted to the ART in the amount of approximately $100,000. These funds were returned to the ART in accordance with Plan provisions regarding unclaimed Distributions and have been recorded as a deferred holder distributions liability. Such funds have reverted to the ART for the benefit of Interest Holders in the class of the forfeiting Holders and will be distributed to such Interest Holders at a time determined by the Trustees.

 

The ART Trustees will continue to retain cash in reserve to administer the ART and fund the prosecution of the Causes of Action and will continue to assess the adequacy of funds held for all potential costs and expenses of the ART and will distribute ART excess assets, if any, to Holders. No Distributions are currently planned. If and when future Distributions occur, they will be made according to the waterfall priority established in the Plan and discussed herein. Any assets not previously distributed by the ART, and that are not required for remaining costs and expenses, will be distributed in accordance with the Trust Declaration upon the dissolution of the ART.

 

7                                                                                                                                         Subsequent Events

 

Events subsequent to March 31, 2014 have been evaluated through May 14, 2014, the date the accompanying financial statements were issued. Other than as discussed herein, there have been no subsequent events that would be material to the financial statements of the ART, including Cause of Action settlements or judgments or Distributions or decisions concerning future Distributions.

 

Item 2                                    Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Overview

 

The ART was formed as a Delaware statutory trust pursuant to that certain First Modified Fifth Amended Joint Chapter 11 Plan of Reorganization of Adelphia and certain of its subsidiaries. The purpose of the ART is to prosecute the various Causes of Action transferred to the ART pursuant to the Plan and distribute to the owners of the Interests in the ART the net proceeds of such Causes of Action, according to the relative priorities established pursuant to the Plan, subject to the retention of various amounts to fund the prosecution of those Causes of Action and operations of the ART. Pursuant to the Plan, in addition to the Causes of Action, Adelphia transferred $25 million in cash to the ART in connection with its formation in 2007 in order to fund the initial expenses of operation.

 

The ART is not subject to federal or state income taxes. The ART is not aware of any transactions or events up to and including March 31, 2014 that would subject it to federal or state income taxes. Further, the ART has no unrecognized income tax benefits as of March 31, 2014 nor are there any amounts required to be included in the financial statements for interest or penalties on unrecognized income tax benefits. Items of income, gain, loss, deduction and other tax items have been and will be allocated to the Holders that would be entitled to receive such items if they constituted cash distributions or reductions therefrom. The Holders are responsible for the payment of taxes on a current basis that result from such allocations whether or not cash is distributed.

 

Adelphia and certain of its subsidiaries filed for Chapter 11 bankruptcy protection in June 2002. During the bankruptcy, on July 31, 2006 the assets of Adelphia were sold for a combination of cash and stock in Time Warner Cable, Inc. (“TWC”). In late 2006, representatives of the various groups of creditors reached agreement on the allocation and distribution of the cash, TWC stock, other proceeds from the sale of estate assets and relative priorities to any Distributions arising from the Causes of Action contributed to the ART.

 

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This agreement was embodied in the Plan, which was confirmed in January 2007 and became effective on February 13, 2007 (the “Effective Date”). Under the Plan, the creditors and equity holders of Adelphia and certain of its subsidiaries received one or more of the following: cash, TWC stock, rights to future Distributions up to payment in full and the Interests.

 

The Plan provides that the ART shall dissolve upon the earlier of the distribution of all of its assets to the Holders or the fifth anniversary of its creation which was on February 13, 2012, subject to the right of the Trustees to extend the ART’s term with the approval of the Bankruptcy Court. In November 2011, the ART filed a motion to extend the term of the ART through December 31, 2014 because several Causes of Action were unlikely to be resolved prior to February 13, 2012. In December 2011 the motion was granted by the Bankruptcy Court. The Bankruptcy Court may approve additional extensions to resolve the Causes of Action, distribute the net proceeds to Holders or complete the administration of the ART.

 

As set forth in the Plan and the Declaration of Trust for the ART, as amended (the “Declaration”), the ART is administered by five Trustees. These Trustees are authorized to carry out the purposes of the ART. In particular, the Trustees are responsible for protecting, maintaining, liquidating to cash and maximizing the value of the Causes of Action contributed to the ART, whether by litigation, settlement or otherwise.

 

Distributions

 

Pursuant to the Plan and the Declaration, Distributions to Holders are net of any costs and expenses incurred by the ART in connection with administering, litigating or otherwise resolving the various Causes of Action. Such costs and expenses may also include fees and expenses of the Trustees, premiums for directors and officers insurance, and other insurance and fees and expenses of attorneys and consultants. Distributions will be made only from assets of the ART and only to the extent that the ART has sufficient assets (over amounts retained for contingent liabilities and future costs and expenses, among other things) to make such payments in accordance with the Plan and the Declaration. No Distribution is required to be made to any Holder unless such Holder is to receive in such Distribution at least $25.00 or unless such Distribution is the final Distribution to such Holder pursuant to the Plan and the Declaration.

 

Distributions are made at the sole discretion of the Trustees in accordance with the provisions of the Plan and the Declaration. The Trust made no Distributions in 2014 or 2013. During 2013 previously issued ART Distributions reverted to the ART in the amount of approximately $100,000. These funds were returned to the ART in accordance with Plan provisions regarding unclaimed distributions and have been recorded as a deferred holder distributions liability. Such funds have reverted to the ART for the benefit of Interest Holders in the class of the forfeiting Holders and will be distributed to such Interest Holders at a time determined by the Trustees.

 

The ART Trustees will continue to retain cash in reserve to administer the ART and fund the prosecution of the Causes of Action and will continue to assess the adequacy of funds held for all potential costs and expenses of the ART and will distribute ART excess assets, if any, to Holders. No Distributions are currently planned. If and when future Distributions occur, they will be made according to the waterfall priority established in the Plan and discussed herein. Any assets not previously distributed by the ART, and that are not required for remaining costs and expenses, will be distributed in accordance with the Trust Declaration upon the dissolution of the ART.

 

10



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As of March 31, 2014, the number of Interests outstanding in each series eligible to receive a Distribution is as follows:

 

CVV Series of Interest:

 

As of March 31, 2014

 

Series RF (1)

 

115,000,000

 

Series Arahova

 

722,639,681

 

Series FrontierVision

 

86,600,001

 

Series FPL

 

25,575,129

 

Series Olympus

 

17,000,001

 

Series ACC-1

 

4,839,988,165

 

Series ACC-2

 

339,207,075

 

Series ACC-3

 

119,430,302

 

Series ESL (2)

 

17

 

Series ACC-4

 

1,790,968,272

 

Series ACC-5 (2)

 

458

 

Series ACC-6B

 

150,000,000

 

Series ACC-6B1 (2)

 

3

 

Series ACC-6D

 

575,000,000

 

Series ACC-6D1 (2)

 

229,004

 

Series ACC-6E/F

 

935,812,456

 

Series ACC-6E/F1 (2)

 

277,210

 

Series ACC-7

 

217,022,640

 

Series ACC-7A (2)

 

1,537,766,752

 

 


(1) Series RF Interests are outstanding, but were paid in full with the March 1, 2012 Distribution and are not eligible for future Distributions.

(2) For each of these categories of Interests (which include disputed claims), each holder of a disputed claim was awarded one Interest. The underlying claims have been expunged or conditionally expunged and these corresponding Interests which are held by the ART Disputed Ownership Fund will be cancelled upon dissolution of the ART.

 

A schedule summarizing the Distribution priority waterfall as of March 31, 2014 is set forth below:

 

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Table of Contents

 

ART Distribution Waterfall Chart

March 31, 2014 (1)

 

Remainig Aggregate Distribution (2)

 

Distribution Description (3)

 

ART Distribution Recipient (4)

 

 

 

 

 

RF

 

0.00

%

 

 

 

 

Arahova

 

0.00

%

 

 

 

 

ACC-1

 

0.00

%

 

 

 

 

Olympus

 

0.00

%

 

 

 

 

FrontierVision

 

0.00

%

 

 

 

 

ACC-2

 

0.00

%

 

 

 

 

ACC-3

 

0.00

%

0

 

RF Holders Paid In Full

 

FPL

 

0.00

%

 

 

 

 

 

 

 

 

 

 

 

 

Arahova

 

45.87

%

 

 

 

 

ACC-1

 

42.73

%

 

 

 

 

Olympus

 

5.00

%

 

 

 

 

FrontierVision

 

2.50

%

0 - 355,000,000

 

Until Series Olympus has received aggregate distributions of $16 million plus the Olympus Fees, plus accrued post-Effective Date dividends

 

ACC-2
ACC-3
FPL

 

2.25
0.90
0.75

%
%
%

 

 

 

 

 

 

 

 

 

 

 

 

Arahova

 

48.37

%

 

 

 

 

ACC-1

 

45.06

%

 

 

 

 

FrontierVision

 

2.50

%

 

 

 

 

ACC-2

 

2.37

%

 

 

 

 

ACC-3

 

0.95

%

355,000,001 - 890,000,000

 

Until cumulative distribution is $1,165 million

 

FPL

 

0.75

%

 

 

 

 

 

 

 

 

 

 

 

 

ACC-1

 

76.60

%

 

 

 

 

Arahova

 

14.51

%

 

 

 

 

ACC-2

 

4.03

%

 

 

 

 

FrontierVision

 

2.50

%

890,000,001 - 4,864,000,000

 

Until Series Arahova has received $625 million plus the Arahova Fees plus accrued post-Effective Date dividends

 

ACC-3
FPL

 

1.61
0.75

%
%

 

 

 

 

 

 

 

 

 

 

 

 

ACC-1

 

90.11

%

4,864,000,001 - 5,348,000,000

 

Until Series FPL has received aggregate distributions of $6.2 million plus Default Interest, plus accrued post-Effective Date dividends (ACC-1, ACC-2 and ACC-3 paid in full)

 

ACC-2
FrontierVision
ACC-3
FPL

 

4.74
2.50
1.90
0.75

%
%
%
%

 

 

 

 

 

 

 

 

5,348,000,001 - 5,360,000,000

 

Until Series FPL has received aggregate distributions of $6.2 million plus Default Interest, plus accrued post-Effective Date dividends

 

Series Arahova
FrontierVision
FPL

 

96.75
2.50
0.75

%
%
%

 

 

 

 

 

 

 

 

 

 

 

 

Series Arahova

 

97.50

%

 

 

 

 

 

 

 

 

5,360,000,001 - 5,382,000,000

 

Until Series FrontierVision has received aggregate distributions of $85 million plus 80% of the FrontierVision Fees, plus accrued post-Effective Date dividends

 

FrontierVision

 

2.50

%

 

 

 

 

 

 

 

 

5,382,000,001 - 5,417,000,000

 

Until the additional distribution to the Series Arahova Interests equals $50 million plus accrued post-Effective Date dividends at a rate of 5% per annum

 

Series Arahova

 

100.00

%

 

 

 

 

 

 

 

 

Not Quantifiable

 

Until ESL holders have received Payment in Full of their Claims and Case 8% interest plus accrued post-Effective Date dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

Not Quantifiable

 

Until ACC-4 holders have received the full amount of their Allowed Claims plus Case Contract Interest plus accrued post-Effective Date dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

Not Quantifiable

 

Until ACC-5 holders have received the full amount of their Allowed Claims plus Case 8% interest plus accrued post-Effective Date dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

Not Quantifiable

 

Until ACC-6 holders receive distributions in accordance with the relative priorities established by the Liquidation Preferences governing the shares of ACC Preferred Stock and the Bankruptcy Code

 

 

 

 

 

 

 

 

 

 

 

 

 

Not Quantifiable

 

Each ACC-7 holder is entitled to receive a pro rata share of any distributions remaining

 

 

 

 

 

 

Capitalized terms used in this chart but not otherwise defined have the respective meaning given to them under the Plan.

 

12



Table of Contents

 


(1)  Remaining aggregate distributions and ART distribution percentages are as of March 31, 2014.

 

(2) Pursuant to the terms of the Plan, certain series of Interests are entitled to post-Effective Date dividends on certain amounts due to the corresponding class of claims. For purposes of calculating the reference amount on which post-Effective Date dividends accrue, the distribution of the True-Up Holdback is treated as if it occurred on the Effective Date.  Remaining aggregate distributions have been reduced as a result of the $215 million cash distribution to certain CVV Holders as of December 21, 2010, the $30 million cash distribution on March 1, 2012, the $30 million cash distribution on December 18, 2012 as well as distributions made by Adelphia for excess reserves and for refunds of reserves established for Settlement Party Fee Claims.

 

(3) Unless otherwise stated, post-Effective Date dividends accrue at a rate of 8.9% per annum.

 

(4) This chart is adjusted in accordance with Plan sections 5.1 and 5.2 with regard to pay-off priorities between the ACC Senior Notes, Trade and Other Unsecured Classes and the Subsidiary Notes Classes due to the magnitude of distributions by Adelphia to the ACC Senior Notes, Trade and Other Unsecured Classes as a result of the release of escrows, reserves and holdbacks.  Sharing percentages portrayed reflect sharing relationships at the entry point of the individual breakpoints illustrated and do not reflect all changes in sharing relationships when multiple classes have concurrent pay-offs.

 

13



Table of Contents

 

Results of Operations

 

The ART operates pursuant to the Plan and the Declaration. The ART was formed as a Delaware statutory trust to prosecute various claims originally owned by Adelphia and, if any of the prosecutions are successful or are settled in a manner which provides economic benefit to the ART, to distribute excess proceeds over amounts retained to fund the prosecution of the Causes of Action and operations of the ART, to the Holders. The Trustees will retain enough cash in reserve to administer the ART and fund the prosecution of the Causes of Action.

 

Due to the nature of the ART’s operations both revenue and operating expenses may fluctuate between and among reporting periods caused by activities and results related to the Causes of Action.

 

First Quarter 2014 versus First Quarter 2013

 

Total revenues consisting soley of interest increased to approximately $105,000 in the first quarter of 2014 from approximately $103,000 in the first quarter of 2013. The revenue increase of approximately $2,000 was caused by an increase in yields on invested cash balances. There were no court approved settlements for the first quarter of 2014 or 2013.

 

Total operating expenses for the ART increased to approximately $790,000 in the first quarter of 2014 from approximately $780,000 in the first quarter of 2013. The operating expense increase of approximately $10,000 was caused by a decrease in general and administrative expenses of approximately $10,000 offset by an increase of professional litigation expenses of approximately $11,000 and an increase in professional administrative expenses of approximately $9,000.

 

General and administrative expenses decreased primarily due to reduced insurance costs for the ART in the first quarter of 2014 when compared to the first quarter of 2013.

 

Professional litigation expenses increased by approximately $11,000 in the first quarter of 2014 compared to the first quarter of 2013 due to increased costs and expenses associated with the pending Causes of Action as described herein.

 

Professional administrative expenses increased by approximately $9,000 in the first quarter of 2014 compared to the first quarter of 2013. The increased expenses in the first quarter of 2014 relate to legal support expenses incurred by the ART to manage trust operations, administrative requirements, Cause of Action oversight and regulatory compliance.

 

As a result of the increase in total revenues of approximately $2,000 and the increase in total operating expenses of approximately $10,000 in the first quarter of 2014 compared to the first quarter of 2013, the net loss of approximately $685,000 for the quarter ended March 31, 2014 was approximately $8,000 more than the net loss of approximately $677,000 for the quarter ended March 31, 2013.

 

Financial Condition and Cash Flows: Liquidity

 

The ART’s sources of liquidity are from (a) the $25 million transferred to the ART by Adelphia pursuant to the Plan on the Effective Date, (b) the successful resolution of Causes of Action and (c) earnings on invested cash balances. Receipts from these sources are used to pay professional and operating expenses of the ART and to fund Distributions to the Holders after reserving cash required to pay future professional and operating expenses of the ART. The Trustees regularly evaluate the future financial needs of the ART.  The Trustees will retain sufficient cash to administer the ART and fund the prosecution of the Causes of Action.

 

Based upon cash and cash equivalent balances as of March 31, 2014 totaling approximately $35.4 million along with expected expenses and other potential disbursements, the ART expects to meet its obligations as they come due during the next twelve months. Due to the uncertain nature of future revenues and expenses beyond twelve months, it is not possible to be certain that cash will be available to cover all the future financial needs of the ART. Incurring debt, creating contingent obligation agreements and seeking methods to reduce

 

14



Table of Contents

 

legal, professional and administrative expenses are all strategies that could be undertaken to address liquidity issues should they arise. These strategies could impact the ART’s ability to maximize recoveries from settlements.

 

The nature of the ART’s operation does not give rise to capital expenditures and there are no current or expected commitments for capital expenditures in the next twelve months. Should a need for capital expenditures arise, the ART would fund the requirement from existing assets.

 

Cash and cash equivalent balances at March 31, 2014 of approximately $35.4 million are approximately $683,000 less than as of December 31, 2013. This decrease is due to the uses of cash and cash equivalents by operating activities of approximately $683,000.

 

The $683,000 use of cash by operating activities included a net loss for the three months ended March 31, 2014 of approximately $685,000. Other uses of cash by operating activities include the accrual of interest on a note receivable of approximately $97,000 which was offset by cash provided by operating activities from a decrease in prepaid assets of approximately $33,000 and an increase in accrued expenses of approximately $66,000 during the three months ended March 31, 2014.

 

As of March 31, 2014, the ART has a total of $35.4 million of cash and cash equivalents which include investments in three-month or shorter FDIC fully-insured bank CDs in the amount of $30.0 million, a U.S. Treasury and government agency securities money market fund in the amount of $1.6 million and deposit accounts in the amount of $3.8 million. The ART considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. As such, the three-month CDs have been classified as cash equivalents as of March 31, 2014. All investments during the quarter were fully compliant with the ART investment policy.

 

The ART has adequate liquidity to meet its obligations as of March 31, 2014.

 

Cautionary Statement Regarding Risks and Uncertainties That May Affect Future Results

 

This report on Form 10-Q contains forward-looking statements about the business, financial condition and prospects of the ART. The actual results of the ART could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties, including, without limitation, the number of and proceeds from litigations and/or settlements which are successful, delays in obtaining proceeds, the amount of funding required for the litigations and other operating expenses, economic conditions, changes in tax and other governmental rules and regulations applicable to the ART, and other risks identified and described in the Form 10-K filed with the SEC on March 12, 2014. These risks and uncertainties are beyond the ability of the ART to control, and in many cases, the ART cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this report the words “believes,” “estimates,” “plans,” “expects,” and “anticipates” and similar expressions as they relate to the ART or its management are intended to identify forward-looking statements.

 

Item 3                                    Quantitative and Qualitative Disclosures about Market Risk

 

The ART invests cash in either FDIC insured deposit accounts, FDIC insured bank CDs or a money market fund invested in short-term U.S. Treasury and government agency securities including repurchase agreements collateralized fully by U.S. Treasury and government agency securities. The CDs have 3 month or less maturity terms and as of March 31, 2014 and the money market fund has a 47 day weighted average maturity for the underlying securities. Interest income from these investments is subject to interest rate fluctuations.

 

Item 4                                    Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

The ART maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports filed under the Exchange Act is recorded, processed, summarized and

 

15



Table of Contents

 

reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that such information is accumulated and communicated to ART Trustees and the Trust Administrator as appropriate, to allow timely decisions regarding required financial disclosure.

 

The Trustees and the Trust Administrator have completed an evaluation of the effectiveness of the design and operation of disclosure controls and procedures as of March 31, 2014. Based on their evaluation, the Trustees and the Trust Administrator concluded that as of March 31, 2014, the ART’s disclosure controls and procedures were effective.

 

Limitations on the Effectiveness of Controls

 

The Trustees and the Trust Administrator do not expect that the ART’s disclosure controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the ART have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Changes in Internal Control over Financial Reporting

 

During the quarter ended March 31, 2014, there were no changes in the ART’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the ART’s internal control over financial reporting.

 

PART II

 

Item 1                                    Legal Proceedings

 

Pending Causes of Action

 

There have been material developments in the legal proceedings described in the ART’s 2013 Form 10-K since the filing on March 12, 2014 which are set forth below.

 

Goldman Sachs Litigation

 

On July 6, 2003, the Creditors Committee filed a complaint in the Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) against Adelphia’s pre-petition commercial banks and lenders, Adelphia’s former investment bankers and financial advisors, and assignees of Adelphia’s pre-petition bank debt (the “Bank Litigation”).  On February 9, 2006, the United States District Court for the Southern District of New York (the “District Court”) granted a motion filed by certain defendants to withdraw the reference to the Bankruptcy Court. Pursuant to the Plan, the claims asserted in the Goldman Sachs Litigation were transferred to the ART.

 

The complaint included a claim for intentional fraudulent transfer against Goldman Sachs, Inc. arising from Adelphia’s pre-petition repayment of the Rigases’ personal margin loans in an amount of approximately $63.0 million.  On May 6, 2009, the Court denied Goldman Sachs’ motion to dismiss.  Goldman moved for

 

16



Table of Contents

 

summary judgment on March 2, 2010.  Following argument in August 2010, Goldman supplemented its motion on November 12, 2010.  On April 7, 2011, the District Court granted Goldman’s summary judgment motion and judgment was entered on April 13, 2011.  On May 6, 2011, the ART timely filed its notice of appeal to the Court of Appeals for the Second Circuit and subsequently filed an appeal. On April 25, 2012, the Second Circuit Court of Appeals heard oral argument on the appeal and took the case under advisement.  On April 4, 2014, the Second Circuit affirmed the District Court’s summary judgment in favor of Goldman Sachs.  No motion for rehearing or petition for writ of certiorari has been filed as of the date of the filing of this report.

 

At this time, the ART cannot predict the outcome of the Goldman Sachs Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

FPL Litigation

 

On June 24, 2004, the Creditors’ Committee filed a fraudulent conveyance complaint against FPL Group, Inc. and West Boca Security, Inc. (collectively, “FPL”) in the Bankruptcy Court for the Southern District of New York relating to pre-petition transactions.  The FPL action seeks to recover an alleged fraudulent transfer arising out of Adelphia’s repurchase of certain of its stock from FPL in January 1999 for $149.5 million. Pursuant to the Plan, the claims asserted in the FPL Litigation were transferred to the ART.

 

On July 13, 2011, the Bankruptcy Court denied FPL’s motion for leave to amend its answer to add a new defense.  FPL filed an appeal of the Bankruptcy Court’s July 13, 2011 decision, which was denied September 18, 2012.  On September 28, 2011, FPL moved to withdraw the reference to Bankruptcy Court.  The District Court denied FPL’s motion to withdraw the reference on January 30, 2012.  Trial began April 30, 2012 and testimony concluded on May 3, 2012.  The parties submitted post-trial briefs on June 22, 2012.  The Bankruptcy Court heard closing arguments on July 25, 2012. On May 6, 2014 the Bankruptcy Court issued proposed Findings of Facts and Conclusions of Law, which recommended that the District Court enter judgment in favor of FPL. The Bankruptcy Court’s proposed Findings of Facts and Conclusions of Law will be reviewed by the District Court under a de novo standard of review before a judgment is entered.

 

At this time, the ART cannot predict the outcome of the FPL Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

17



Table of Contents

 

Item 1A.                        Risk Factors

 

As of the date of this filing there have been no material changes from the risk factors previously disclosed in our “Risk Factors” in the ART’s Form 10-K for the year ended December 31, 2013 as filed with the SEC on March 12, 2014.

 

18



Table of Contents

 

Item 6                                    Exhibits

 

 

2.1*

 

First Modified Fifth Amended Joint Chapter 11 Plan of Reorganization of Adelphia Communications Corporation and Certain of its Affiliated Debtors, effective February 13, 2007

 

 

 

 

 

3.1*

 

Restated Certificate of Trust, dated February 13, 2007

 

 

 

 

 

3.2*

 

Amendment to Restated Certificate of Trust, dated March 15, 2007

 

 

 

 

 

3.3*

 

Second Amended and Restated Declaration of Trust, dated June 4, 2008

 

 

 

 

 

3.4*

 

Rules and Procedures of Adelphia Recovery Trust

 

 

 

 

 

4.1*

 

Form of Certificate Evidencing Undivided Beneficial Interests in the Assets of the Adelphia Recovery Trust (Global Certificate)

 

 

 

 

 

4.2*

 

Form of Certificate Evidencing Undivided Beneficial Interests in the Assets of the Adelphia Recovery Trust (Book Entry Certificate)

 

 

 

 

 

10.1*

 

Plan Administrator Agreement, dated February 12, 2007

 

 

 

 

 

10.2*

 

Trustee Compensation Agreement

 


*Incorporated by reference to the Form 10 of Adelphia Recovery Trust (File No. 000-53209) filed April 30, 2008 and the amended Form 10 filed July 2, 2008.

 

31.1

 

Section 302 Certification of Trustee

31.2

 

Section 302 Certification of Trust Administrator

32.1

 

Certification of Trustee pursuant to 18 U.S.C. 1350 Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002

32.2

 

Certification Trust Administrator pursuant to 18 U.S.C. 1350 Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002

101

 

The following materials from Adelphia Recovery Trust’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013, formatted in XBRL: (i) Condensed Balance Sheets (ii) Condensed Statements of Operations (iii) Condensed Statements of Cash Flows; and (iv) Notes to Condensed Financial Statements as detailed tags.

 

19



Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: May 14, 2014

 

 

 

By: Quest Turnaround Advisors, LLC

 

as Trust Administrator of the Adelphia Recovery Trust

 

/s/ Jeffrey A. Brodsky

 

Jeffrey A. Brodsky

 

Member

 

 

20


EX-31.1 2 a14-9636_1ex31d1.htm EX-31.1

EXHIBIT 31.1

 

SECTION 302 CERTIFICATION

 

I, Ralph J. Takala, certify that:

 

1. I have reviewed this report for the period ended March 31, 2014 on Form 10-Q of Adelphia Recovery Trust;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 14, 2014

 

 

 

/s/ Ralph J. Takala

 

Ralph J. Takala

 

Trustee

 

 


EX-31.2 3 a14-9636_1ex31d2.htm EX-31.2

EXHIBIT 31.2

 

SECTION 302 CERTIFICATION

 

I, Jeffrey A. Brodsky, certify that:

 

1. I have reviewed this report for the period ended March 31, 2014 on Form 10-Q of Adelphia Recovery Trust;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 



 

Date: May 14, 2014

 

 

 

By: Quest Turnaround Advisors, LLC

 

as Trust Administrator of the Adelphia Recovery Trust

 

 

 

/s/ Jeffrey A. Brodsky

 

Jeffrey A. Brodsky

 

Member

 

 


EX-32.1 4 a14-9636_1ex32d1.htm EX-32.1

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Adelphia Recovery Trust (the “Trust”) on Form 10-Q for the period ended March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ralph J. Takala, Trustee of the Trust, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust.

 

/s/ Ralph J. Takala

 

Ralph J. Takala

 

Trustee

 

 

 

 

 

Date: May 14, 2014

 

 


EX-32.2 5 a14-9636_1ex32d2.htm EX-32.2

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Adelphia Recovery Trust (the “Trust”) on Form 10-Q for the period ended March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey A. Brodsky, a member of Quest Turnaround Advisors, LLC, Trust Administrator of the Trust, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust.

 

By: Quest Turnaround Advisors, LLC

 

as Trust Administrator of the Adelphia Recovery Trust

 

 

 

/s/ Jeffrey A. Brodsky

 

Jeffrey A. Brodsky

 

Member

 

 

 

 

 

Date: May 14, 2014

 

 


EX-101.INS 6 adrt-20140331.xml XBRL INSTANCE DOCUMENT 0001433669 2014-03-31 0001433669 2013-12-31 0001433669 2014-01-01 2014-03-31 0001433669 2013-01-01 2013-03-31 0001433669 2012-12-31 0001433669 2013-03-31 0001433669 adrt:AdelphiaCommunicationsCorporationMember 2014-01-01 2014-03-31 0001433669 adrt:QuestTurnaroundAdvisorsLLCAndAdelphiaCommunicationsCorporationMember 2014-01-01 2014-03-31 0001433669 adrt:PersonalMarginLoansMember adrt:GoldmanSachsLitigationMember us-gaap:PendingLitigationMember 2014-01-01 2014-03-31 0001433669 adrt:RepurchaseOfStockMember adrt:FPLLitigationMember us-gaap:PendingLitigationMember 2014-01-01 2014-03-31 0001433669 2004-06-24 2004-06-25 0001433669 us-gaap:NotesReceivableMember us-gaap:FairValueInputsLevel3Member 2013-12-31 0001433669 us-gaap:NotesReceivableMember us-gaap:FairValueInputsLevel3Member 2014-03-31 0001433669 us-gaap:NotesReceivableMember 2014-03-31 0001433669 us-gaap:NotesReceivableMember 2013-12-31 0001433669 us-gaap:NotesReceivableMember 2014-01-01 2014-03-31 0001433669 adrt:MrAndMrsLeonardTowMember 2014-01-01 2014-03-31 iso4217:USD xbrli:shares xbrli:pure adrt:trustee adrt:agreement adrt:complaint adrt:item 35397903 36081284 605803 639198 7436381 7338876 43440087 44059358 136895 71342 99979 99979 236874 171321 43203213 43888037 43440087 44059358 105224 103104 105224 103104 686604 696570 18378 7900 85066 75907 790048 780377 -684824 -677273 -33395 251777 97505 97484 65553 -259326 -683381 -1285860 -683381 -1285860 38500583 37214723 Adelphia Recovery Trust 0001433669 10-Q 2014-03-31 false --12-31 Yes Smaller Reporting Company 2014 Q1 0 <div style="font-size:10.0pt;font-family:Times New Roman;"> <p style="MARGIN: 0in 0in 0pt 0.25in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">1</font><font style="FONT-SIZE: 3pt;" size="1">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font> <u><font style="FONT-SIZE: 10pt;" size="2">Background</font></u></p> <p style="TEXT-INDENT: -0.5in; MARGIN: 0in 0in 0pt 0.75in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">The Adelphia Recovery Trust (the &#8220;<u>ART</u>&#8221;) was formed as a Delaware statutory trust pursuant to that certain First Modified Fifth Amended Joint Chapter 11 Plan of Reorganization (the &#8220;<u>Plan</u>&#8221;) of Adelphia Communications Corporation (&#8220;<u>Adelphia</u>&#8221; or <u>&#8220;ACC&#8221;</u>) and certain of its subsidiaries (collectively the <u>&#8220;Debtor&#8221;</u>). The purpose of the ART is to prosecute the various causes of action transferred to the ART pursuant to the Plan (the &#8220;<u>Causes of Action</u>&#8221;) and distribute to the owners (the &#8220;<u>Holders</u>&#8221;) of the interests in the ART (&#8220;<u>Interests</u>&#8221;) the net proceeds of such Causes of Action (&#8220;<u>Distributions</u>&#8221;), according to the relative priorities established pursuant to the Plan, subject to the retention of various amounts to fund the prosecution of those Causes of Action and operations of the ART. Pursuant to the Plan, in addition to the Causes of Action, Adelphia transferred $25 million in cash to the ART, in connection with its formation, in order to fund the initial expenses of operation.</font></p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">As set forth in the Plan, the ART is administered by five trustees (the &#8220;<u>Trustees</u>&#8221;) who are responsible for carrying out the purposes of the ART. Quest Turnaround Advisors, L.L.C. (&#8220;<u>Quest</u>&#8221;) is the plan administrator (in such capacity, the &#8220;<u>Plan Administrator</u>&#8221;) of Adelphia. Quest and Adelphia together have agreed to provide certain administrative services to the ART. In order to facilitate the provision of such administrative services, the ART has appointed Quest as the trust administrator of the ART (in such capacity, the &#8220;<u>Trust Administrator</u>&#8221;).</font></p> </div> <div style="font-size:10.0pt;font-family:Times New Roman;"> <p style="MARGIN: 0in 0in 0pt 0.25in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">2</font><font style="FONT-SIZE: 3pt;" size="1">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font> <u><font style="FONT-SIZE: 10pt;" size="2">Basis of Presentation</font></u></p> <p style="TEXT-INDENT: -0.5in; MARGIN: 0in 0in 0pt 0.75in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">The accompanying interim unaudited condensed financial statements of the ART have been prepared in accordance with generally accepted accounting principles in the United States of America (&#8220;<u>US GAAP</u>&#8221;) for interim periods and with the instructions to Form 10-Q. &#160;As such, they do not include all of the information and disclosures required by US GAAP for complete financial statements. &#160;In the opinion of the Trustees, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the interim unaudited condensed financial statements have been included. These condensed financial statements should be read in conjunction with the ART&#8217;s audited financial statements for the year ended December 31, 2013 included in its Form&#160;10-K filed with the Securities and Exchange Commission (&#8220;<u>SEC</u>&#8221;) on March 12, 2014. Interim results are not necessarily indicative of the results for the complete fiscal year. 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Pursuant to the Plan, the claims asserted in the Goldman Sachs Litigation were transferred to the ART.</font></p> <p style="TEXT-INDENT: 22.5pt; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">The complaint included a claim for intentional fraudulent transfer against Goldman Sachs,&#160;Inc. arising from Adelphia&#8217;s pre-petition repayment of the Rigases&#8217; personal margin loans in an amount of approximately $63.0 million.&#160; On May&#160;6, 2009, the Court denied Goldman Sachs&#8217; motion to dismiss.&#160;&#160;Goldman moved for summary judgment on March&#160;2, 2010.&#160; Following argument in August 2010, Goldman supplemented its motion on November&#160;12, 2010.&#160;&#160;On April&#160;7, 2011, the District Court granted Goldman&#8217;s summary judgment motion and judgment was entered on April&#160;13, 2011.&#160; On May&#160;6, 2011, the ART timely filed its notice of appeal to the Court of Appeals for the Second Circuit and subsequently filed an appeal. On April 25, 2012, the Second Circuit Court of Appeals heard oral argument on the appeal and took the case under advisement.&#160; On April 4, 2014, the Second Circuit affirmed the District Court&#8217;s summary judgment in favor of Goldman Sachs.&#160; No motion for rehearing or petition for writ of <i>certiorari</i> has been filed, as of the date of the filing of this report.</font></p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">At this time, the ART cannot predict the outcome of the Goldman Litigation or estimate the possible financial effect of this proceeding on the ART&#8217;s financial statements.</font></p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="MARGIN: 0in 0in 0pt 0.5in;"><b><u><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold;" size="2">FPL Litigation</font></u></b></p> <p style="MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">On June&#160;24, 2004, the Creditors&#8217; Committee filed a fraudulent conveyance complaint against FPL Group,&#160;Inc. and West Boca Security,&#160;Inc. (collectively, &#8220;FPL&#8221;) in the Bankruptcy Court for the Southern District of New York relating to pre-petition transactions.&#160;&#160;The FPL action seeks to recover an alleged fraudulent transfer arising out of Adelphia&#8217;s repurchase of certain of its stock from FPL in January&#160;1999 for $149.5 million. Pursuant to the Plan, the claims asserted in the FPL Litigation were transferred to the ART.</font></p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">On July&#160;13, 2011, the Bankruptcy Court denied FPL&#8217;s motion for leave to amend its answer to add a new defense. &#160;FPL filed an appeal of the Bankruptcy Court&#8217;s July&#160;13, 2011 decision, which was denied September&#160;18, 2012.&#160; On September 28, 2011, FPL moved to withdraw the reference to Bankruptcy Court.&#160; The District Court denied FPL&#8217;s motion to withdraw the reference on January 30, 2012.&#160; Trial began April&#160;30, 2012 and testimony concluded on May&#160;3, 2012.&#160; The parties submitted post-trial briefs on June 22, 2012.&#160; The Bankruptcy Court heard closing arguments on July&#160;25, 2012. On May 6, 2014 the Bankruptcy Court issued proposed Findings of Facts and Conclusions of Law, which recommended that the District Court enter judgment in favor of FPL. The Bankruptcy Court&#8217;s proposed Findings of Facts and Conclusions of Law will be reviewed by the District Court under a <i>de novo</i> standard of review before a judgment is entered.</font></p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">At this time, the ART cannot predict the outcome of the FPL Litigation or estimate the possible financial effect of this proceeding on the ART&#8217;s financial statements.</font></p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="MARGIN: 0in 0in 0pt 0.5in;"><b><u><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold;" size="2">Prestige Litigation</font></u></b></p> <p style="MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">On June&#160;24, 2004, the Creditors&#8217; Committee filed an adversary action against Prestige Communications of NC,&#160;Inc., Jonathan J. Oscher, Lorraine Oscher McClain, Robert F. Buckfelder, Buckfelder Investment Trust, and Anverse,&#160;Inc. in the Bankruptcy Court for the Southern District of New York.&#160;&#160;In a decision dated January&#160;8, 2008, the District Court withdrew the reference to the Bankruptcy Court in the Prestige action and transferred the case to the District Court.</font></p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">The Prestige action seeks to recover fraudulent transfers in connection with Adelphia&#8217;s purchase of the assets of Prestige Communications of N.C.,&#160;Inc., an acquisition that closed on July&#160;5, 2000, as well as a claim that the owners of the Prestige Cable Systems aided and abetted breaches of fiduciary duty on the part of the Rigas family in connection with the transaction. &#160;Pursuant to the Plan, which became effective on February&#160;13, 2007, the claims asserted in the Prestige Litigation were transferred to the ART.</font></p> <p style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt;" align="center">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">On October&#160;27, 2009, Defendants moved for summary judgment on the ART&#8217;s claims.&#160;&#160;On June&#160;27, 2011, the District Court granted Defendants&#8217; summary judgment motion and judgment was entered on June&#160;28, 2011.&#160; The ART timely filed its notice of appeal to the Court of Appeals for the Second Circuit.&#160; The appeal is being briefed.</font></p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">At this time, the ART cannot predict the outcome of the Prestige Litigation or estimate the possible financial effect of this proceeding on the ART&#8217;s financial statements.</font></p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="MARGIN: 0in 0in 0pt 0.5in;"><b><u><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold;" size="2">Avoidance Actions</font></u></b></p> <p style="MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">On July&#160;31, 2003, Adelphia and its debtor affiliates filed with the Bankruptcy Court their Statements of Financial Affairs, which included a schedule of payments to insider entities made within one year prior to Adelphia&#8217;s filing for bankruptcy and payments to non-insider entities made within ninety days prior to Adelphia&#8217;s filing for bankruptcy. Subsequently, Adelphia engaged in extensive analysis of all such payments to determine if they could be avoided pursuant to certain provisions of the Code.</font></p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">On April&#160;20, 2004, Adelphia filed a motion seeking to abandon most of the potential actions to avoid the pre-petition payments because, among other reasons, (i)&#160;Adelphia believed that pursuing certain of such actions against parties with whom Adelphia was continuing to do business could have a significant adverse impact on important, ongoing business relationships, and (ii) the costs associated with pursuing such actions far outweighed any potential benefit to the Adelphia debtors&#8217; estates that might otherwise result from bringing such actions. In response to certain objections to Adelphia&#8217;s motion, Adelphia amended its initial motion.</font></p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">On May&#160;27, 2004, the Bankruptcy Court entered an order tolling all claims to avoid inter-debtor payments and authorizing the abandonment of potential actions to avoid (i)&#160;transfers to taxing authorities; (ii)&#160;transfers to human resource providers engaged in business with Adelphia; (iii)&#160;transfers determined to have been made in the ordinary course of business; and (iv) certain transfers deemed <i>de minimis</i>. As to the remainder of the transfers made by Adelphia during the relevant one-year and ninety-day periods prior to the bankruptcy filing, Adelphia either (i)&#160;entered into tolling agreements with the transferee extending Adelphia&#8217;s time to initiate an action, or (ii) filed a complaint and initiated an adversary proceeding against the transferee.</font></p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">As of June&#160;25, 2004, Adelphia secured approximately 250 tolling agreements with various transferees, including members of the Rigas family, the Rigas family entities, former executives James Brown and Michael Mulcahey, and former directors Erland Kailbourne, Dennis Coyle, Leslie Gelber, and Peter Metros, among others. Certain of these tolling agreements have been amended from time to time. In addition, Adelphia filed approximately 150 complaints in the Bankruptcy Court commencing actions to avoid certain pre-petition transfers and payments. Most of those complaints have since been dismissed or resolved after further investigation.</font></p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">At this time, the ART cannot predict the outcome of the remaining claims or estimate the possible financial effect of these proceedings on the ART&#8217;s financial statements.</font></p> </div> <div style="font-size:10.0pt;font-family:Times New Roman;"> <p style="MARGIN: 0in 0in 0pt 0.25in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">5</font><font style="FONT-SIZE: 3pt;" size="1">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font> <u><font style="FONT-SIZE: 10pt;" size="2">Fair Value of Financial Instruments</font></u></p> <p style="TEXT-INDENT: -0.5in; MARGIN: 0in 0in 0pt 0.75in;">&#160;</p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">The ART had no temporary investments as of March&#160;31, 2014 or December&#160;31, 2013.</font></p> <p style="TEXT-INDENT: -0.5in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">The fair value of the note receivable and accrued interest has been determined using unobservable inputs (i.e. Level 3, as defined in Accounting Standards Codification 820-10) and approximates $5.8 million as of March&#160;31, 2014 and December 31, 2013. The fair value was derived by discounting to March&#160;31, 2014 and December&#160;31, 2013 the projected maturity value of the note including accrued interest. The projected maturity values, including interest were calculated using life expectancy tables. The discount rate is based on the yield on the notes issued by the life insurance companies underwriting the life insurance policies and various risk factors associated with the note. The discount rate approximated the interest rate on the note during the first quarter of 2014.</font></p> <p style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt;" align="center">&#160;</p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">The carrying values were approximately $7.4 million as of March&#160;31, 2014 and approximately $7.3 million as of December 31, 2013. 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These funds were returned to the ART in accordance with Plan provisions regarding unclaimed Distributions and have been recorded as a deferred holder distributions liability. Such funds have reverted to the ART for the benefit of Interest Holders in the class of the forfeiting Holders and will be distributed to such Interest Holders at a time determined by the Trustees.</font></p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0in 0in 0pt 0.5in;">&#160;</p> <p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt 0.5in;"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2">The ART Trustees will continue to retain cash in reserve to administer the ART and fund the prosecution of the Causes of Action and will continue to assess the adequacy of funds held for all potential costs and expenses of the ART and will distribute ART excess assets, if any, to Holders. No Distributions are currently planned. If and when future Distributions occur, they will be made according to the waterfall priority established in the Plan and discussed herein. 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These condensed financial statements should be read in conjunction with the ART&#8217;s audited financial statements for the year ended December 31, 2013 included in its Form&#160;10-K filed with the Securities and Exchange Commission (&#8220;<u>SEC</u>&#8221;) on March 12, 2014. Interim results are not necessarily indicative of the results for the complete fiscal year. 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Fair Value of Financial Instruments
3 Months Ended
Mar. 31, 2014
Fair Value of Financial Instruments  
Fair Value of Financial Instruments

5                                                                                                                                         Fair Value of Financial Instruments

 

The ART had no temporary investments as of March 31, 2014 or December 31, 2013.

 

The fair value of the note receivable and accrued interest has been determined using unobservable inputs (i.e. Level 3, as defined in Accounting Standards Codification 820-10) and approximates $5.8 million as of March 31, 2014 and December 31, 2013. The fair value was derived by discounting to March 31, 2014 and December 31, 2013 the projected maturity value of the note including accrued interest. The projected maturity values, including interest were calculated using life expectancy tables. The discount rate is based on the yield on the notes issued by the life insurance companies underwriting the life insurance policies and various risk factors associated with the note. The discount rate approximated the interest rate on the note during the first quarter of 2014.

 

The carrying values were approximately $7.4 million as of March 31, 2014 and approximately $7.3 million as of December 31, 2013. The note bears 8% simple interest and is recourse only to the proceeds of various life insurance policies on Mr. and Mrs. Leonard Tow totaling approximately $27 million.

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Pending Causes of Action
3 Months Ended
Mar. 31, 2014
Pending Causes of Action  
Pending Causes of Action

4                                                                                                                                         Pending Causes of Action

 

There have been material developments in the legal proceedings described in the ART’s 2013 Form 10-K since the filing on March 12, 2014.  For convenience, the current status of the ART’s pending causes of action is set forth below.

 

Goldman Sachs Litigation

 

On July 6, 2003, the Creditors Committee filed a complaint in the Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) against Adelphia’s pre-petition commercial banks and lenders, Adelphia’s former investment bankers and financial advisors, and assignees of Adelphia’s pre-petition bank debt (the “Bank Litigation”).  On February 9, 2006, the United States District Court for the Southern District of New York (the “District Court”) granted a motion filed by certain defendants to withdraw the reference to the Bankruptcy Court. Pursuant to the Plan, the claims asserted in the Goldman Sachs Litigation were transferred to the ART.

 

The complaint included a claim for intentional fraudulent transfer against Goldman Sachs, Inc. arising from Adelphia’s pre-petition repayment of the Rigases’ personal margin loans in an amount of approximately $63.0 million.  On May 6, 2009, the Court denied Goldman Sachs’ motion to dismiss.  Goldman moved for summary judgment on March 2, 2010.  Following argument in August 2010, Goldman supplemented its motion on November 12, 2010.  On April 7, 2011, the District Court granted Goldman’s summary judgment motion and judgment was entered on April 13, 2011.  On May 6, 2011, the ART timely filed its notice of appeal to the Court of Appeals for the Second Circuit and subsequently filed an appeal. On April 25, 2012, the Second Circuit Court of Appeals heard oral argument on the appeal and took the case under advisement.  On April 4, 2014, the Second Circuit affirmed the District Court’s summary judgment in favor of Goldman Sachs.  No motion for rehearing or petition for writ of certiorari has been filed, as of the date of the filing of this report.

 

At this time, the ART cannot predict the outcome of the Goldman Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

FPL Litigation

 

On June 24, 2004, the Creditors’ Committee filed a fraudulent conveyance complaint against FPL Group, Inc. and West Boca Security, Inc. (collectively, “FPL”) in the Bankruptcy Court for the Southern District of New York relating to pre-petition transactions.  The FPL action seeks to recover an alleged fraudulent transfer arising out of Adelphia’s repurchase of certain of its stock from FPL in January 1999 for $149.5 million. Pursuant to the Plan, the claims asserted in the FPL Litigation were transferred to the ART.

 

On July 13, 2011, the Bankruptcy Court denied FPL’s motion for leave to amend its answer to add a new defense.  FPL filed an appeal of the Bankruptcy Court’s July 13, 2011 decision, which was denied September 18, 2012.  On September 28, 2011, FPL moved to withdraw the reference to Bankruptcy Court.  The District Court denied FPL’s motion to withdraw the reference on January 30, 2012.  Trial began April 30, 2012 and testimony concluded on May 3, 2012.  The parties submitted post-trial briefs on June 22, 2012.  The Bankruptcy Court heard closing arguments on July 25, 2012. On May 6, 2014 the Bankruptcy Court issued proposed Findings of Facts and Conclusions of Law, which recommended that the District Court enter judgment in favor of FPL. The Bankruptcy Court’s proposed Findings of Facts and Conclusions of Law will be reviewed by the District Court under a de novo standard of review before a judgment is entered.

 

At this time, the ART cannot predict the outcome of the FPL Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

Prestige Litigation

 

On June 24, 2004, the Creditors’ Committee filed an adversary action against Prestige Communications of NC, Inc., Jonathan J. Oscher, Lorraine Oscher McClain, Robert F. Buckfelder, Buckfelder Investment Trust, and Anverse, Inc. in the Bankruptcy Court for the Southern District of New York.  In a decision dated January 8, 2008, the District Court withdrew the reference to the Bankruptcy Court in the Prestige action and transferred the case to the District Court.

 

The Prestige action seeks to recover fraudulent transfers in connection with Adelphia’s purchase of the assets of Prestige Communications of N.C., Inc., an acquisition that closed on July 5, 2000, as well as a claim that the owners of the Prestige Cable Systems aided and abetted breaches of fiduciary duty on the part of the Rigas family in connection with the transaction.  Pursuant to the Plan, which became effective on February 13, 2007, the claims asserted in the Prestige Litigation were transferred to the ART.

 

On October 27, 2009, Defendants moved for summary judgment on the ART’s claims.  On June 27, 2011, the District Court granted Defendants’ summary judgment motion and judgment was entered on June 28, 2011.  The ART timely filed its notice of appeal to the Court of Appeals for the Second Circuit.  The appeal is being briefed.

 

At this time, the ART cannot predict the outcome of the Prestige Litigation or estimate the possible financial effect of this proceeding on the ART’s financial statements.

 

Avoidance Actions

 

On July 31, 2003, Adelphia and its debtor affiliates filed with the Bankruptcy Court their Statements of Financial Affairs, which included a schedule of payments to insider entities made within one year prior to Adelphia’s filing for bankruptcy and payments to non-insider entities made within ninety days prior to Adelphia’s filing for bankruptcy. Subsequently, Adelphia engaged in extensive analysis of all such payments to determine if they could be avoided pursuant to certain provisions of the Code.

 

On April 20, 2004, Adelphia filed a motion seeking to abandon most of the potential actions to avoid the pre-petition payments because, among other reasons, (i) Adelphia believed that pursuing certain of such actions against parties with whom Adelphia was continuing to do business could have a significant adverse impact on important, ongoing business relationships, and (ii) the costs associated with pursuing such actions far outweighed any potential benefit to the Adelphia debtors’ estates that might otherwise result from bringing such actions. In response to certain objections to Adelphia’s motion, Adelphia amended its initial motion.

 

On May 27, 2004, the Bankruptcy Court entered an order tolling all claims to avoid inter-debtor payments and authorizing the abandonment of potential actions to avoid (i) transfers to taxing authorities; (ii) transfers to human resource providers engaged in business with Adelphia; (iii) transfers determined to have been made in the ordinary course of business; and (iv) certain transfers deemed de minimis. As to the remainder of the transfers made by Adelphia during the relevant one-year and ninety-day periods prior to the bankruptcy filing, Adelphia either (i) entered into tolling agreements with the transferee extending Adelphia’s time to initiate an action, or (ii) filed a complaint and initiated an adversary proceeding against the transferee.

 

As of June 25, 2004, Adelphia secured approximately 250 tolling agreements with various transferees, including members of the Rigas family, the Rigas family entities, former executives James Brown and Michael Mulcahey, and former directors Erland Kailbourne, Dennis Coyle, Leslie Gelber, and Peter Metros, among others. Certain of these tolling agreements have been amended from time to time. In addition, Adelphia filed approximately 150 complaints in the Bankruptcy Court commencing actions to avoid certain pre-petition transfers and payments. Most of those complaints have since been dismissed or resolved after further investigation.

 

At this time, the ART cannot predict the outcome of the remaining claims or estimate the possible financial effect of these proceedings on the ART’s financial statements.

XML 17 R2.htm IDEA: XBRL DOCUMENT v2.4.0.8
Condensed Balance Sheets (USD $)
Mar. 31, 2014
Dec. 31, 2013
Assets    
Cash and cash equivalents $ 35,397,903 $ 36,081,284
Prepaid assets 605,803 639,198
Note and accrued interest receivable 7,436,381 7,338,876
Total assets 43,440,087 44,059,358
Liabilities and net assets    
Accrued expenses 136,895 71,342
Deferred holder distributions 99,979 99,979
Total liabilities 236,874 171,321
Net assets 43,203,213 43,888,037
Total liabilities and net assets $ 43,440,087 $ 44,059,358
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Basis of Presentation
3 Months Ended
Mar. 31, 2014
Basis of Presentation  
Basis of Presentation

2                                                                                                                                         Basis of Presentation

 

The accompanying interim unaudited condensed financial statements of the ART have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim periods and with the instructions to Form 10-Q.  As such, they do not include all of the information and disclosures required by US GAAP for complete financial statements.  In the opinion of the Trustees, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the interim unaudited condensed financial statements have been included. These condensed financial statements should be read in conjunction with the ART’s audited financial statements for the year ended December 31, 2013 included in its Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 12, 2014. Interim results are not necessarily indicative of the results for the complete fiscal year. The condensed balance sheet as of December 31, 2013 was derived from the audited financial statements for the year then ended.

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Related Party Transactions
3 Months Ended
Mar. 31, 2014
Related Party Transactions  
Related Party Transactions

3                                                                                                                                         Related Party Transactions

 

The Trust Administrator and Adelphia continue to provide administrative support to the ART including maintaining electronic data and paper documents used in prosecuting the Causes of Action, financial reporting and support for Distributions when they might occur (including maintenance of data related to the implementation of Plan provisions). These services have and will continue to be provided at no cost to the ART under the terms of various agreements between the Trust Administrator and Adelphia. The ART financial statements do not reflect any amounts for these services.

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Condensed Statements of Operations (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Revenues    
Interest income $ 105,224 $ 103,104
Total revenues 105,224 103,104
Operating expenses    
General and administrative expenses 686,604 696,570
Professional expenses - litigation 18,378 7,900
Professional expenses - administrative 85,066 75,907
Total operating expenses 790,048 780,377
Net loss $ (684,824) $ (677,273)
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Interest Holder Distribution (Details) (USD $)
3 Months Ended
Mar. 31, 2014
item
Interest Holder Distribution  
Amount distributed in cash to the holders of interests in the trust $ 100,000
Number of currently planned distributions 0
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Document and Entity Information
3 Months Ended
Mar. 31, 2014
Document and Entity Information  
Entity Registrant Name Adelphia Recovery Trust
Entity Central Index Key 0001433669
Document Type 10-Q
Document Period End Date Mar. 31, 2014
Amendment Flag false
Current Fiscal Year End Date --12-31
Entity Current Reporting Status Yes
Entity Filer Category Smaller Reporting Company
Entity Common Stock, Shares Outstanding 0
Document Fiscal Year Focus 2014
Document Fiscal Period Focus Q1
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Condensed Statements of Cash Flows (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Operating activities    
Net loss $ (684,824) $ (677,273)
Adjustments to reconcile net loss to net cash used by operating activities consisting of changes in operating assets and liabilities:    
Prepaid assets 33,395 (251,777)
Note and accrued interest receivable (97,505) (97,484)
Accrued expenses 65,553 (259,326)
Net cash used by operating activities (683,381) (1,285,860)
Net change in cash and cash equivalents (683,381) (1,285,860)
Cash and cash equivalents, beginning of period 36,081,284 38,500,583
Cash and cash equivalents, end of period $ 35,397,903 $ 37,214,723
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Basis of Presentation (Policies)
3 Months Ended
Mar. 31, 2014
Basis of Presentation  
Basis of Presentation

Basis of Presentation

 

The accompanying interim unaudited condensed financial statements of the ART have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim periods and with the instructions to Form 10-Q.  As such, they do not include all of the information and disclosures required by US GAAP for complete financial statements.  In the opinion of the Trustees, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the interim unaudited condensed financial statements have been included. These condensed financial statements should be read in conjunction with the ART’s audited financial statements for the year ended December 31, 2013 included in its Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 12, 2014. Interim results are not necessarily indicative of the results for the complete fiscal year. The condensed balance sheet as of December 31, 2013 was derived from the audited financial statements for the year then ended.

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Subsequent Events
3 Months Ended
Mar. 31, 2014
Subsequent Events  
Subsequent Events

7                                                                                                                                         Subsequent Events

 

Events subsequent to March 31, 2014 have been evaluated through May 14, 2014, the date the accompanying financial statements were issued. Other than as discussed herein, there have been no subsequent events that would be material to the financial statements of the ART, including Cause of Action settlements or judgments or Distributions or decisions concerning future Distributions.

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Pending Causes of Action (Details) (USD $)
In Millions, unless otherwise specified
0 Months Ended 3 Months Ended
Jun. 25, 2004
agreement
complaint
Mar. 31, 2014
Personal margin loans
Goldman Sachs Litigation
Pending litigation
Mar. 31, 2014
Repurchase of stock
FPL Litigation
Pending litigation
Causes of Action      
Amount sought or claimed under litigation   $ 63.0 $ 149.5
Number of tolling agreements with various transferees 250    
Number of complaints in the Bankruptcy Court 150    
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Background (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
trustee
Related party transactions  
Number of individual trustees 5
Adelphia
 
Related party transactions  
Contribution from Adelphia for the purpose of pursuing the Causes of Action $ 25
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Related Party Transactions (Details) (Trust Administrator and Adelphia, USD $)
3 Months Ended
Mar. 31, 2014
Trust Administrator and Adelphia
 
Related Party Transactions  
Administrative support cost $ 0
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Fair Value of Financial Instruments (Details) (USD $)
3 Months Ended
Mar. 31, 2014
Dec. 31, 2013
Fair Value of Financial Instruments    
Temporary investments $ 0 $ 0
Fair Value of Financial Instruments    
Carrying value of the note receivable and accrued interest 7,436,381 7,338,876
Mr. and Mrs. Leonard Tow
   
Fair Value of Financial Instruments    
Proceeds of various life insurance policies 27,000,000  
Note receivable and accrued interest
   
Fair Value of Financial Instruments    
Carrying value of the note receivable and accrued interest 7,400,000 7,300,000
Simple interest rate (as a percent) 8.00%  
Note receivable and accrued interest | Level 3
   
Fair Value of Financial Instruments    
Fair value of the note receivable and accrued interest $ 5,800,000 $ 5,800,000
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Background
3 Months Ended
Mar. 31, 2014
Background  
Background

1                                                                                                                                         Background

 

The Adelphia Recovery Trust (the “ART”) was formed as a Delaware statutory trust pursuant to that certain First Modified Fifth Amended Joint Chapter 11 Plan of Reorganization (the “Plan”) of Adelphia Communications Corporation (“Adelphia” or “ACC”) and certain of its subsidiaries (collectively the “Debtor”). The purpose of the ART is to prosecute the various causes of action transferred to the ART pursuant to the Plan (the “Causes of Action”) and distribute to the owners (the “Holders”) of the interests in the ART (“Interests”) the net proceeds of such Causes of Action (“Distributions”), according to the relative priorities established pursuant to the Plan, subject to the retention of various amounts to fund the prosecution of those Causes of Action and operations of the ART. Pursuant to the Plan, in addition to the Causes of Action, Adelphia transferred $25 million in cash to the ART, in connection with its formation, in order to fund the initial expenses of operation.

 

As set forth in the Plan, the ART is administered by five trustees (the “Trustees”) who are responsible for carrying out the purposes of the ART. Quest Turnaround Advisors, L.L.C. (“Quest”) is the plan administrator (in such capacity, the “Plan Administrator”) of Adelphia. Quest and Adelphia together have agreed to provide certain administrative services to the ART. In order to facilitate the provision of such administrative services, the ART has appointed Quest as the trust administrator of the ART (in such capacity, the “Trust Administrator”).

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Interest Holder Distribution
3 Months Ended
Mar. 31, 2014
Interest Holder Distribution  
Interest Holder Distribution

6                                                                                                                                         Interest Holder Distribution

 

The Trustees have not authorized or completed any Distributions for the ART in 2014 or 2013. During 2013, previously issued ART Distributions reverted to the ART in the amount of approximately $100,000. These funds were returned to the ART in accordance with Plan provisions regarding unclaimed Distributions and have been recorded as a deferred holder distributions liability. Such funds have reverted to the ART for the benefit of Interest Holders in the class of the forfeiting Holders and will be distributed to such Interest Holders at a time determined by the Trustees.

 

The ART Trustees will continue to retain cash in reserve to administer the ART and fund the prosecution of the Causes of Action and will continue to assess the adequacy of funds held for all potential costs and expenses of the ART and will distribute ART excess assets, if any, to Holders. No Distributions are currently planned. If and when future Distributions occur, they will be made according to the waterfall priority established in the Plan and discussed herein. Any assets not previously distributed by the ART, and that are not required for remaining costs and expenses, will be distributed in accordance with the Trust Declaration upon the dissolution of the ART.

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