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Case study · CASE:real-companies/adelphia-related-party-debt

Adelphia: whose debt is it, and who bears the risk?

Reconstruct the related party borrowing, co borrowing exposure, and governance questions alleged in the SEC's Adelphia complaint.

Updated Aug 7, 2026 Review due Nov 7, 2026
On this page
  1. Your role and decision
  2. Evidence packet
  3. Required work
  4. Constraints
  5. Evaluation
Decision brief

Your assignment

Role: Credit analyst preparing a risk memo on a public company with founder-family entities and shared borrowing arrangements

Deliverable: A lender-style exposure map and governance memo distinguishing legal borrower, guarantor, cash beneficiary, reported obligation, economic risk, and disclosure.

Evidence basis: public records

Visible standard

Evaluation criteria

  • party and flow reconstruction (30%): Maps public and family-controlled entities, lenders, cash flows, obligations, guarantees, and benefits without collapsing them into one party.
  • accounting and exposure analysis (25%): Separates balance-sheet recognition, disclosure, legal obligation, liquidity access, and economic loss exposure.
  • governance analysis (25%): Identifies conflicts, approval and recusal needs, monitoring evidence, and minority-investor or creditor information gaps.
  • source bounded conclusion (20%): Labels allegations, states unresolved facts, and requests specific agreements and confirmations before reaching a credit conclusion.

Your role and decision

A lender sees one reported debt figure but learns that the public company and founder-family entities share borrowing facilities. The legal borrower, cash user, guarantor, and party presented to investors may not be the same. You must determine what exposure the lender can actually evaluate.

Evidence packet

Use the SEC complaint concerning Adelphia and members of the Rigas family. It states allegations, not a complete set of loan agreements, board minutes, bank confirmations, or adjudicated findings for every assertion.

Required work

  1. Draw a party-and-flow diagram: public issuer, controlled affiliates, family entities, banks, drawdowns, cash recipients, repayment sources, guarantees, and reported treatment.
  2. Create separate columns for legal obligation, accounting recognition, disclosure, liquidity access, and economic loss exposure. Explain why they can differ.
  3. Identify related-party conflicts and the board information, approval, recusal, monitoring, and disclosure process a reviewer should expect.
  4. Request the specific contracts, confirmations, cash tracing, consolidation analysis, covenant calculations, and subsequent-event evidence needed before making a credit recommendation.

Constraints

Do not assume that all shared facilities are improper or that legal separation alone removes economic exposure. Preserve allegation status and avoid inventing missing contract terms.

Evaluation

The best memo makes obligations and incentives visible before computing a ratio. It shows why a related-party footnote, a consolidation conclusion, and a credit exposure analysis answer different questions.