<PAGE>
PROSPECTUS SUPPLEMENT
Filed Pursuant to Rule 424(b)5
(To Prospectus Dated October 25, 1999)
Registration No. 333-88927
ADELPHIA BUSINESS SOLUTIONS, INC. LOGO
8,750,000 Shares
Adelphia Business Solutions, Inc.
Class A Common Stock
------------
We are selling 8,750,000 shares of our Class A common stock that will result
in gross proceeds of approximately $262.5 million. The underwriters named in
this prospectus supplement may purchase up to 1,312,500 additional shares of
our Class A common stock from us under certain circumstances.
We have entered into an agreement with Adelphia Communications Corporation
under which Adelphia will purchase 5,181,350 shares of our Class B common stock
that will result in proceeds of approximately $150.0 million. These shares will
be sold to Adelphia at the public offering price less underwriting discount for
the shares offered in the Offering.
Our Class A common stock is quoted on the Nasdaq National Market under the
symbol "ABIZ." The last reported sale price of our Class A common stock on the
Nasdaq National Market on November 23, 1999 was $30.188 per share. Before
October 27, 1999, our Class A common stock was quoted on the Nasdaq National
Market under the symbol "HYPT."
------------
Investing in our Class A common stock involves risks. See "Risk Factors"
beginning on page S-8.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement is truthful or complete. Any representation to the
contrary is a criminal offense.
------------
<TABLE>
<CAPTION>
Per Share Total
--------- ------------
<S> <C> <C>
Public Offering Price.................................. $30.00 $262,500,000
Underwriting Discount.................................. $ 1.05 $9,187,500
Proceeds to Adelphia Business Solutions (before ex-
penses)............................................... $28.95 $253,312,500
</TABLE>
The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about November
30, 1999.
------------
Salomon Smith Barney
Credit Suisse First Boston
Donaldson, Lufkin & Jenrette
Goldman, Sachs & Co.
Banc of America Securities LLC
CIBC World Markets
Credit Lyonnais Securities (USA) Inc.
First Union Securities, Inc.
November 23, 1999
<PAGE>
You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not authorized anyone to provide you with different information. We are
not making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information contained in or
incorporated by reference in this prospectus supplement or the accompanying
prospectus is accurate as of any date other than the date on the front of this
prospectus supplement.
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement Summary............................................ S-1
Risk Factors............................................................. S-8
Use of Proceeds.......................................................... S-18
Capitalization........................................................... S-19
Price Range of Adelphia Business Solutions' Common Equity and Dividend
Policy.................................................................. S-20
Dilution................................................................. S-21
Certain United States Tax Consequences to Non-United States Holders...... S-22
Underwriting............................................................. S-25
Where You Can Find More Information...................................... S-27
Legal Matters............................................................ S-28
Experts.................................................................. S-28
</TABLE>
Prospectus
<TABLE>
<CAPTION>
Page
----
<S> <C>
Adelphia Business Solutions.............................................. 2
Risk Factors............................................................. 3
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends............................................................... 13
Dilution................................................................. 13
Use of Proceeds.......................................................... 13
Description of Debt Securities........................................... 13
Description of Capital Stock............................................. 24
Book Entry Issuance...................................................... 28
Plan of Distribution..................................................... 30
Where You Can Find More Information...................................... 31
Legal Matters............................................................ 32
Experts.................................................................. 32
</TABLE>
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
This summary may not contain all the information that may be important to
you. You should read this entire prospectus supplement and the entire attached
prospectus and those documents incorporated by reference into this document,
including the risk factors, financial data and related notes, before making an
investment decision. "We," "our," "ours," "us" or "Adelphia Business Solutions"
means Adelphia Business Solutions, Inc. together with its majority-owned
subsidiaries, except where the context otherwise requires. Unless the context
otherwise requires, references to the networks mean the telecommunications
networks, in operation or under construction, owned as of September 30, 1999,
which are our wholly and majority-owned subsidiaries or joint ventures managed
by us and in which we hold less than a majority equity interest with one or
more other partners, and the additional networks under development as of such
date.
Adelphia Business Solutions
We are a leading national provider of facilities-based integrated
communications services to customers that include businesses, governmental and
educational end users and other communications services providers throughout
the United States. We currently offer a full range of communications services
in 50 markets and expect by the end of the year 2000 to be offering services in
approximately 115 markets nationwide, including substantially all of the top 40
metropolitan statistical areas in the United States. To serve our customers'
broad and expanding communications needs, we have assembled a diverse
collection of high-bandwidth, local and national network assets. We intend to
integrate these assets with advanced communications technologies and services
in order to provide comprehensive end-to-end communications services over our
own national network. We provide customers with communications services such as
local switch dial tone (also known as local phone service), long distance
service, high-speed data transmission and Internet connectivity. We offer our
customers a choice of receiving these services separately or as bundled
packages which are typically priced at a discount when compared to the price of
the separate services.
In order to take advantage of the improved economic returns and better
customer service from providing services "on-net," or over our own network
system, we are in the process of further expanding the reach of our network
system nationwide. As of September 30, 1999, our original 22 local networks (we
refer to these as the "Original Markets") spanned approximately 6,350 route
miles, or an average of 288 route miles per network, making our networks among
the largest of all local providers. Our Original Markets are principally
located in the eastern half of the United States; however, due to our success
in operating and expanding these markets, we are pursuing an aggressive
nationwide growth plan. We intend to serve 200 total markets nationwide by the
end of the year 2001, leveraging our existing and planned switching platforms
and inter-city fiber networks. We believe that this nationwide footprint will
enable us to address approximately 65% of the 60 million business access lines
nationwide, which addressable market currently represents approximately $75
billion in annual revenues. Our network system expansion includes the purchase,
lease or construction of local fiber optic network facilities and the
interconnection of all of our existing and new markets with our own fiber optic
network facilities. We will also implement various technologies, including a
technology known as dense wave division multiplexing, to provide greater
bandwidth capacity on our local and long-haul network system. Once fully
installed, our approximately 30,000 route mile fiber optic backbone will
connect each of our local markets. This fully redundant network system will
support our full line of communications service offerings.
To further expand our local network system, in March 1998 we purchased from
the FCC 195 spectrum licenses for a fixed wireless technology known as local
multipoint distribution service, or LMDS. These licenses cover over 83 million
people throughout the eastern half of the United States, or approximately 30%
of the nation's population. Our ownership of this spectrum may permit us to
employ a wireless connection strategy to complement our existing local fiber
assets as an alternative means of providing on-net connectivity to our fiber
network where fiber may not be available or economically justified.
S-1
<PAGE>
In May 1999, we announced our intention to further complement our high-
bandwidth network assets through the deployment of Digital Subscriber Line, or
DSL, technology. As of September 30, 1999, wehad arrangements with incumbent
local exchange carriers with respect to co-locating our network connection
equipment in 150 of their local serving offices. During the year 2000, we plan
to co-locate in over 500 local serving offices, which will all be equipped with
DSL equipment. We intend to use DSL to deliver bundled voice and data product
offerings where we have not yet installed our own fiber network, or where fiber
network deployment is not economical. This technology, when deployed, will
represent another cost-effective high bandwidth option to deliver
communications services over our own network system.
We believe that our operating and financial results in our Original Markets
have been strong as illustrated in the table below:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1999
------------------ ------------------
Original Original
Markets (a) Markets (a)
------------------ ------------------
(dollars in millions)
<S> <C> <C>
Revenues.................................. $ 19.6 $ 49.5
Gross Margin % (b)........................ 48.8% 69.9%
EBITDA (c)................................ $ (5.1) $ 9.9
EBITDA % of Revenues...................... (25.9%) 20.0%
Access Lines in Service................... 76,701 196,829
</TABLE>
- --------
(a) Represents the 22 Original Markets in which we were providing service at
the time of our initial public offering in May 1998. As of September 30,
1999, we owned 100% of 18 of these 22 markets and these 18 wholly owned
markets were therefore consolidated in our financial results. All amounts
stated are for all 22 markets and therefore these results are not
necessarily indicative of what our performance would be if we owned 100% of
all the Original Markets.
(b) Represents revenues less network operations expenses as a percentage of
revenues.
(c) Represents earnings before interest expense, income taxes, depreciation and
amortization, other non-cash charges, gain on sale of investment, interest
income and equity in net loss of joint ventures. EBITDA and similar
measurements of cash flow are commonly used in the telecommunications
industry to analyze and compare telecommunications companies on the basis
of operating performance, leverage and liquidity. While EBITDA is not an
alternative to operating income as an indicator of operating performance or
an alternative to cash flows from operating activities as a measure of
liquidity, all as defined by generally accepted accounting principles, and
while EBITDA may not be comparable to other similarly titled measures of
other companies, our management believes EBITDA is a meaningful measure of
performance.
Historically, we have built robust local networks by partnering with local
cable operators or electric utilities to gain access to conduits and rights-of-
way. During the past three years, we have completed 13 transactions to purchase
our partners' interests in markets we serve, aggregating a total purchase price
of approximately $208 million. With the completion of these transactions, we
own 100% of the ownership interests in 18 of our 22 Original Markets and all of
our new networks, representing a weighted average proportionate ownership as of
September 30, 1999 of approximately 93%, based on property, plant and
equipment, compared to our approximately 77% ownership on the same basis as of
March 31, 1998.
Business Strategy
The key components of our strategy as a leading provider of integrated
communications services are:
Focus On Communications-Intensive Customers
We provide our services to communications-intensive customers that include
businesses, governmental and educational end users and other communications
services providers. We believe that our target customers
S-2
<PAGE>
represent a large and under-served customer pool that generally have limited
choices when making their communications services purchasing decisions. These
customers generally seek reliability, high quality, broad geographic coverage,
end-to-end service, solutions-oriented customer service and timely introduction
of new and innovative services.
We also offer dedicated access services on a wholesale basis to
interexchange or long distance carriers and have entered into national service
agreements with AT&T and MCIWorldCom to be their preferred supplier.
Expansion of Sales and Customer Care Effort
Our goal is to become the principal and preferred cost-effective alternative
to the other existing communications services providers and create better
customer retention. To achieve this and to capitalize on our expanding
addressable market, we have rapidly increased and intend to continue to
increase our direct sales and support team consisting of highly skilled sales
professionals and engineers. We have expanded our sales force from 128
salespeople on December 31, 1997 to 568 salespeople on September 30, 1999 and
expect to increase our sales force to approximately 600 salespeople by December
31, 1999.
In addition, we believe that the best way to care for a customer is to
provide local customer service after the sale. Each of our markets has a
dedicated team of trained customer care professionals committed to ensuring
that we meet or exceed our customer's expectations. On September 30, 1999, we
had approximately 275 professionals committed to our customer care effort which
we expect will increase to approximately 300 professionals by December 31,
1999.
Focus On Providing Bundled Packages of Communications Services
In response to market demands and to maximize our selling efforts, we offer
a full suite of communications services to our customers. We offer our services
separately to suit specific customer needs or bundled together to provide
customers with a cost-effective and comprehensive communications solution. In
addition to the pricing benefits our customers receive from purchasing bundled
communications services, we believe that bundled services provide us with
increased customer retention, higher operating margins and a reduced cost of
acquiring new customers.
Our service offerings currently include a wide range of local dial tone and
long distance services in all of our operating markets. In addition, we have
recognized the expanding demand for high-bandwidth by our customers in order to
support the growing number of data applications. Our first data product to take
advantage of these additional revenue opportunities is high-speed Internet
access, which has been introduced in most of our Original Markets and will be
rolled out to all of our markets over the next several months. Additionally, we
plan to add to our product capabilities by activating data centers and
providing such products as e-mail, directory services and web hosting, and by
launching DSL, frame relay and ATM services over the next six months. To
accelerate our frame relay and ATM service offerings, we entered into a
wholesale provider agreement with Intermedia Communications, whereby we will
use their frame relay network and data switches to offer data services to our
customers and then move our customers' traffic onto our own network system as
it becomes operational. We believe this approach provides an efficient market-
entry strategy under the Adelphia Business Solutions trade name, while
providing better long-term operating margins through the use of our own network
system. We believe that the introduction of high margin data products should
drive revenue growth and better leverage our significant fiber assets.
Drive On-Net Traffic Over High Capacity Fiber Optic Network System
The broad deployment of fiber optic cable in our markets typically enables
connectivity among ourselves, the incumbent carriers' local serving offices and
our customers. We expect this strategy to result in a high proportion of
traffic that is both originated and terminated on our network system, which
would provide us with
S-3
<PAGE>
higher long-term operating margins. For the September 1999 quarter, our gross
margin was 63% of revenues, which we believe is among the highest in the
industry. As of September 30, 1999, we had co-located in 150 incumbent
carriers' local serving offices, a figure which we expect to increase to over
500 during the year 2000. In addition, we had 250,805 installed access lines as
of September 30, 1999, 57% of which were on-switch.
In addition to the broad deployment of fiber optic cable in our local
markets, we have been aggressively adding an inter-city fiber network that
connects our local markets. Once fully deployed, this approximately 30,000 mile
fiber optic backbone will enhance our ability to originate and terminate our
customers' communications traffic over our own networks. We believe long-term
operating margins on our long distance and data businesses will increase
significantly as a result of connecting these markets. We also believe that our
planned deployment of LMDS and DSL technologies will provide additional,
alternative means to connect customers to our networks.
Expand Market Roll-out Throughout United States
In July 1998, we announced that we were expanding the scope of our business
plan to add 50 new markets to our existing 22 Original Markets, expanding our
presence to approximately 30 states throughout the
eastern United States. We recently announced that we expect to further expand
our network system to include an additional 130 markets by the end of 2001,
expanding our presence to approximately 200 markets throughout the continental
United States. These 200 markets represent a total addressable market
opportunity of 39 million business access lines, which currently generate over
$75 billion of annual communications services revenues.
We plan to roll out service in these new markets through the use of large
regionally based Lucent 5ESS switches that will serve several markets in
geographic proximity to the switch. Each of these markets will be connected to
the nationwide system network by inter-city fiber that has been or will be
purchased or leased from one or more of a number of fiber optic transmission
providers.
Recent Development
On October 25, 1999, we announced that we had completed the change of our
legal name from "Hyperion Telecommunications, Inc." to "Adelphia Business
Solutions, Inc." This name change was approved at the annual meeting of
stockholders held on October 25, 1999. We also announced that our Nasdaq
National Market stock symbol had been changed from "HYPT" to "ABIZ." These
changes became effective with the Nasdaq National Market prior to the
commencement of trading on October 27, 1999.
------------
Our executive offices are located at One North Main Street, Coudersport,
Pennsylvania 16915, and our telephone number is (814) 274-9830.
S-4
<PAGE>
The Offering
Class A Common Stock Offered........ 8,750,000 shares
Common Stock to be Outstanding
after the Offering:
Class A Common Stock............. 32,715,385 shares (1)
Class B Common Stock ............ 36,720,327 shares (2)
Total .......................... 69,435,712 shares
Use of Proceeds..................... The net proceeds from the Class A
common stock to be sold in the
Offering (approximately $252.8
million) and from the Class B
common stock to be sold to Adelphia
(approximately $150.0 million) will
be used to fund our national
expansion, working capital
requirements, operating losses and
pro rata investments in our
networks and for general corporate
purposes. See "Use of Proceeds."
Rights of Holders of Class A Common
Stock and Class B Common Stock..... The rights of holders of Class A
common stock and Class B common
stock differ with respect to voting
rights. Holders of Class B common
stock are entitled to 10 votes per
share while the holders of Class A
common stock are entitled to 1 vote
per share on all matters presented
to stockholders. See "Description
of Capital Stock" in the attached
prospectus.
Nasdaq National Market Symbol for
Class A Common Stock...............
ABIZ
- --------
(1) We calculated outstanding shares above assuming the underwriters did not
exercise their overallotment option and based on the number of shares
outstanding as of November 8, 1999, excluding 392,597 shares of Class A
common stock issuable upon exercise of outstanding Class B Warrants as of
November 8, 1999 and conversion of the underlying Class B common stock
into Class A common stock, 1,621,499 shares of Class A common stock
issuable upon exercise of any outstanding warrants held by Adelphia or any
shares issuable upon exercise of outstanding options to purchase Class A
common stock under our 1996 Long-Term Incentive Compensation Plan.
(2) Includes 5,181,350 shares, which is the approximate number of shares to be
sold directly to Adelphia.
S-5
<PAGE>
Summary Consolidated Financial and Operational Data
(dollars in thousands, except per share amounts)
The following summary consolidated financial data as of March 31, 1998 and
December 31, 1998 and for each of the four years in the period ended March 31,
1998 and the nine months ended December 31, 1998 have been derived from our
audited consolidated financial statements. This data should be read in
conjunction with the consolidated financial statements and related notes
thereto as of March 31, 1998 and December 31, 1998 and for each of the two
years in the period ended March 31, 1998 and the nine months ended December 31,
1998 and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in the Transition Report on Form 10-K which is
incorporated herein by reference. The statement of operations data and the
other financial data with respect to the fiscal years ended March 31, 1995 and
1996 have been derived from our audited consolidated financial statements not
included in the Transition Report on Form 10-K. The data as of September 30,
1999 and for the nine months ended September 30, 1998 and 1999 are unaudited;
however, in the opinion of management, such data reflect all adjustments
(consisting only of normal recurring adjustments) necessary to fairly present
the data for such interim periods and dates. This interim period data should be
read in conjunction with the condensed consolidated financial statements and
related notes thereto as of December 31, 1998 and September 30, 1999 and for
the three- and nine-month periods ended September 30, 1998 and 1999 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the Form 10-Q for the quarterly period ended September
30, 1999 which is incorporated herein by reference. Operating results for the
nine months ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999. Operating
Data is derived from our other operations information.
<TABLE>
<CAPTION>
Nine Months
Ended Nine Months Ended
Fiscal Year Ended March 31, December 31, September 30,
1995 1996 1997 1998 1998 1998 1999
-------- -------- -------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data (a):
Revenues............... $ 1,729 $ 3,322 $ 5,088 $ 13,510 $ 34,776 $ 24,553 $ 99,000
Operating expenses:
Network operations..... 1,382 2,690 3,432 7,804 18,709 14,586 36,037
Selling, general and
administrative........ 2,524 3,084 6,780 14,314 35,341 24,038 93,618
Depreciation and
amortization.......... 463 1,184 3,945 11,477 26,671 20,413 45,289
-------- -------- -------- --------- --------- --------- ---------
Operating loss......... (2,640) (3,636) (9,069) (20,085) (45,945) (34,484) (75,944)
Gain on sale of
investment............ -- -- 8,405 -- -- -- --
Interest income and
other................. 39 199 5,976 13,304 19,741 19,689 26,588
Interest expense ...... (3,321) (6,088) (28,377) (49,334) (38,638) (39,639) (56,383)
Equity in net loss of
joint ventures........ (1,799) (4,292) (7,223) (12,967) (9,580) (9,487) (7,340)
Net loss............... (7,692) (13,620) (30,547) (69,082) (74,185) (63,684) (113,083)
Net loss applicable to
common stockholders... (7,692) (13,620) (30,547) (81,491) (95,302) (84,132) (136,251)
Basic and diluted net
loss per weighted
average
share of common
stock................. $ (0.24) $ (0.42) $ (0.89) $ (2.33) $ (1.80) $ (1.82) $ (2.46)
Other Financial Data
(a):
EBITDA (b)............. $ (2,177) $ (2,452) $ (5,124) $ (8,608) $ (19,274) $ (14,071) $ (30,655)
Capital expenditures
and investments (c)... 10,376 18,899 79,396 132,889 215,770 177,640 259,839
Cash used in operating
activities............ (2,130) (833) (4,823) (6,333) (8,810) (11,580) (79,642)
Cash used in investing
activities............ (10,376) (18,899) (72,818) (266,604) (200,458) (205,005) (338,304)
Cash provided by
financing activities.. 12,506 19,732 137,455 443,873 221,088 10,309 301,364
Weighted average
ownership in networks
(d)................... 46% 44% 53% 77% 79% 79% 93%
</TABLE>
<TABLE>
<CAPTION>
September 30, 1999
March 31, December 31, ---------------------------
1998 1998 Actual As Adjusted (e)
--------- ------------ ---------- ---------------
<S> <C> <C> <C> <C>
Balance Sheet Data (b):
Cash and cash
equivalents.............. $ 230,750 $242,570 $ 125,988 $528,788
U.S. Government
Securities--pledged...... 70,535 58,054 29,451 29,451
Property, plant and
equipment--net........... 250,633 374,702 740,870 740,870
Total assets.............. 639,992 836,342 1,078,885 1,481,685
Long term debt and
exchangeable redeemable
preferred stock.......... 735,980 722,783 1,091,369 1,091,369
Common stock and other
stockholders' equity
(deficiency)............. (118,991) 74,031 (62,364) 340,436
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31, September 30,
1998 1998 1999
--------- ------------ -------------
<S> <C> <C> <C>
Operating Data (f):
Route miles (g)........................... 5,363 15,005 15,648
Fiber miles (g)........................... 249,672 369,777 390,931
Buildings connected (h)................... 1,909 1,748 2,118
Switches installed (i).................... 17 20 22
Access lines in service................... 23,200 110,005 250,805
LEC collocations.......................... 113 123 150
Employees (j)............................. 577 969 1,752
</TABLE>
S-6
<PAGE>
- --------
(a) Represents our financial information and our consolidated subsidiaries. As
of September 30, 1999, four of our networks were owned by joint ventures in
which we owned an interest of 50% or less, and for which we reported our
interest pursuant to the equity method of accounting consistent with
generally accepted accounting principles.
(b) Represents earnings before interest expense, income taxes, depreciation and
amortization, other non-cash charges, gain on sale of investment, interest
income and equity in net loss of joint ventures ("EBITDA") and similar
measurements of cash flow are commonly used in the telecommunications
industry to analyze and compare telecommunications companies on the basis
of operating performance, leverage and liquidity. While EBITDA is not an
alternative to operating income as an indicator of operating performance or
an alternative to cash flows from operating activities as a measure of
liquidity, all as defined by generally accepted accounting principles, and
while EBITDA may not be comparable to other similarly titled measures of
other companies, our management believes EBITDA is a meaningful measure of
performance.
(c) For the fiscal years ended March 31, 1995, 1996, 1997 and 1998, the nine
months ended December 31, 1998, and the nine months ended September 30,
1998 and 1999, our capital expenditures (including capital expenditures
relating to our wholly owned operating companies) were $2.9, $6.1, $24.6,
$68.6, $146.8, $145.5, and $232.4 million, respectively, and our
investments in less than wholly owned operating companies were $7.5, $12.8,
$34.8, $64.3, $69.0, $32.2, and $27.4 million, respectively, for the same
periods. See our consolidated financial statements and notes thereto
included in the Transition Report on Form 10-K.
(d) Based upon our gross property, plant and equipment and the networks at the
end of each period presented.
(e) Reflects the effect of the Offering and the Adelphia Direct Placement as if
such events occurred September 30, 1999.
(f) Represents data for 100% of the networks.
(g) Data includes networks under construction.
(h) Represents buildings connected by fiber we own.
(i) Represents Lucent 5ESS switches or remote switch modules which deliver full
switch functionality.
(j) Includes our employees and employees of the networks and Adelphia Business
Solutions.
S-7
<PAGE>
RISK FACTORS
Before you invest in our securities, you should be aware that there are
various risks, including those described below. You should consider carefully
these risk factors together with all of the other information included in this
prospectus supplement before you decide to purchase any of our securities. If
any of the following risks actually occurs, our business, financial condition
or results of operations could be materially adversely affected. In such case,
you may lose all or part of your original investment.
High Level Of
Indebtedness
Adelphia Business Solutions has a substantial
As of September 30, amount of debt. We borrowed this money to purchase
1999, we owed and to expand our telecommunications systems and
approximately $1.1 other operations and, to a lesser extent, for
billion. Our high level investments and loans to our affiliates. On
of indebtedness can have September 30, 1999, our indebtedness and redeemable
important adverse preferred stock totaled approximately
consequences to us and $1,091,369,000. This included approximately:
to you.
. $245,052,000 of 13% senior discount notes due
2003;
. $250,000,000 of 12 1/4% senior secured notes
due 2004 which are secured by the equity we
own in some of our telephone networks;
. $300,000,000 of 12% senior subordinated notes
due 2007; and
. $252,261,000 of redeemable preferred stock
due October 15, 2007.
Commencing 1999 we
have had to begin We have or will have to start funding cash payments
funding substantial cash on these debts as follows:
payments.
. commencing May 1, 1999--semi-annual interest
payments of $18,000,000 on the 12% senior
subordinated notes due 2007;
. commencing March 1, 2001--semi-annual
interest payments of $15,300,000 on our 12
1/4% senior secured notes due 2004;
. commencing October 15, 2001--semi-annual
interest payments of $19,800,000 on our 13%
senior discount notes due 2003; and
. commencing October 15, 2002--quarterly cash
dividends of approximately $12,200,000 on our
redeemable preferred stock.
This could affect our Our high level of indebtedness can have important
ability to invest in our adverse consequences to us and to you. In the
business in the future future it will require that we spend a substantial
as well as our ability portion of the cash we get from our business to
to react to changes in repay the principal and interest on these debts.
our industry or economic Otherwise, we could use these funds for general
downturns. corporate purposes or for capital improvements. Our
ability to obtain new loans for working capital,
capital expenditures, acquisitions or capital
improvements may be limited by our current level of
debt. In addition, having such a high level of debt
could limit our ability to react to changes in our
industry and to economic conditions generally and
may put us at a competitive disadvantage to
competitors who have lower debt levels.
S-8
<PAGE>
Our Business Requires
Substantial Additional Our business requires substantial additional
Financing And If We Do financing on a continuing basis for capital
Not Obtain That expenditures and other purposes including:
Financing, We May Not Be
Able To Expand Our
Networks, Offer
Services, Make Payments
When Due Or Refinance
Existing Debt
. installing additional electronics and
computers in our telephone networks that
route a telephone caller to the number he or
she dialed;
. expanding our Network Operations and Control
Center and improving our existing telephone
networks;
. designing, constructing and developing, or
acquiring, new telephone networks;
. continued purchasing of our partners'
interests in the telephone networks we do not
wholly own; and
. scheduled principal and interest payments on
our debt.
There can be no guarantee that we will be able to
issue additional debt or sell stock or other
additional equity on satisfactory terms, or at all,
to meet our future financing needs.
We Have Had Large We have incurred substantial net losses for each
Losses, And We Expect year of operations since our inception in 1991. Our
This To Continue recent net losses applicable to our common
stockholders were approximately as follows:
. fiscal year ended March 31, 1996--
$13,620,000;
. fiscal year ended March 31, 1997--
$30,547,000;
. fiscal year ended March 31, 1998--
$81,491,000;
. nine months ended December 31, 1998--
$95,302,000; and
. nine months ended September 30, 1999--
$136,251,000.
Our earnings have
been insufficient to pay Our earnings could not pay for our combined fixed
for our fixed charges charges and preferred stock dividends during these
and preferred stock periods by the amounts set forth in the table
dividends below.
<TABLE>
<CAPTION>
Earnings
Deficiency
------------
<S> <C>
.fiscal year ended March 31, 1997 $ 30,288,000
.fiscal year ended March 31, 1998 $ 85,762,000
.nine months ended December 31, 1998 $105,525,000
.nine months ended September 30, 1999 $150,906,000
</TABLE>
S-9
<PAGE>
If we cannot Historically, we have depended on getting
refinance our debt or additional borrowings and selling equity to meet
obtain new loans, we our cash needs. Although in the past we have been
would likely have to able to obtain additional borrowings and sell
consider various options equity, there can be no guarantee that we will be
such as the sale of able to do so in the future or that the cost to us
additional equity or or the other terms which would affect us would be
some of our assets to as favorable to us as our current indentures. The
meet the principal and covenants in our indentures for our current debt
interest payments as limit our ability to borrow more money.
they become due,
negotiate with our
lenders to restructure
existing loans or
explore other options
available under
applicable laws,
including those under
reorganization or
bankruptcy laws. We
cannot guarantee that
any options available to
us would enable us to
repay our debt in full.
Holding Company We do not directly own any significant assets other
Structure than stock, partnership interests, equity and other
interests in our operating companies. We do not
receive cash flow from operations except to the
extent that our operating companies pay management
fees or make distributions to us. In the event of
an insolvency of an operating company, creditors of
that operating company would be entitled to be paid
in full before dividends or other distributions
would be made to us. In addition, we do not own a
controlling interest in some of these operating
companies. This business structure creates risks
regarding our obtaining cash from our business
operations which could adversely affect our ability
to repay the interest and principal which we owe,
to get new loans, to fund future development of
existing networks and new networks and to pay cash
dividends to our common stockholders in the future.
We depend on our
subsidiaries' and joint
ventures' cash payments
and distributions to
fund our cash needs.
New Service Acceptance We are in the process of introducing a number of
By Customers services, primarily local exchange services, that
we believe are important to our long-term growth.
The success of these services will be dependent
upon, among other things, the willingness of
customers to accept us as a new provider of such
new telecommunications services. There is no
guarantee that this acceptance will occur, and the
lack of this acceptance could have a material
adverse effect on us.
Risks From Rapid We are in a period of rapid expansion which we
Expansion believe will continue and which we expect to
accelerate in the foreseeable future. Our operating
complexity, as well as the responsibilities of
management personnel, have increased as a result of
our expansion. Our ability to manage this growth
effectively will require us to continue to expand
and improve our operational and financial systems
and to expand, train and manage our employee base.
In addition, we and our operating companies have
significantly increased, and intend to continue,
the hiring of additional sales and marketing
personnel. We cannot guarantee that these new
S-10
<PAGE>
personnel will be successfully integrated into us
or our operating companies or that we can hire a
sufficient number of qualified personnel. Our
inability to effectively manage the hiring of
additional personnel and expansion could have a
material adverse effect on our business and results
of operations.
Our expansion is also dependent upon the expansion
of our fiber optic network through the continued
acquisition of indefeasible rights of use (IRUs)
for local and long-haul fiber optic plant or our
built fiber optic plant when IRUs are not available
or cost justified. If new IRUs cannot be obtained
or if such fiber optic plant is not delivered or
built by us on a timely basis, the development of
the new markets and the interconnection of existing
and new networks may be delayed, which could have a
material adverse effect on us.
Control By Adelphia As of September 30, 1999, Adelphia Communications
Communications Corporation beneficially owned shares representing
Corporation about 66% of the total number of outstanding shares
of both classes of our common stock and about 90%
of the total number of outstanding shares of our
Class B common stock. After the consummation of the
Offering and the Adelphia Direct Placement,
Adelphia will beneficially own shares representing
about 60% of the total number of outstanding shares
of both classes of our common stock. As a result of
Adelphia's stock ownership, Adelphia has the power
to elect all of our directors. In addition,
Adelphia could control stockholder decisions on
other matters such as amendments to our Certificate
of Incorporation and Bylaws, and mergers or other
fundamental corporate transactions. Adelphia could
also transfer control of us to an unrelated third
person by transferring our Class B common stock.
Adelphia can control
and can transfer control
of stockholder decisions
on very important
matters.
There Are Potential Adelphia's activities could present a conflict of
Conflicts Of Interest interest with us, such as pursuing business
Between Us And Adelphia opportunities in the telecommunications industry.
Communications In addition, there have been and will continue to
Corporation be transactions between us and Adelphia or the
other entities or persons they own or have
affiliations with. Our debt indentures contain
covenants that place some restrictions on
transactions between us and our affiliates.
Need To Obtain Permits We expect that in connection with our planned
And Rights-of-Way construction and development of new networks that
we must obtain and maintain permits and rights-of-
way for the cabling needed to develop and operate
such networks. In addition, we may require pole
attachment or conduit use agreements with incumbent
local exchange carriers, utilities or other local
exchange carriers to operate existing networks and
new networks. There is no guarantee that we, our
operating companies, our local partners, or
Adelphia will be able to obtain new permits and
rights-of-way, pole attachment and conduit use, to
maintain existing permits and rights-of-way or to
obtain and maintain the other permits and rights-
of-way needed to develop and operate existing
networks and new networks. Failure to obtain or
maintain necessary permits, rights-of-way and
agreements could have a material adverse effect on
our ability to operate and expand our networks.
S-11
<PAGE>
In addition, the amount of lease payments made by
our operating companies could be affected by the
costs our local partners incur for attachments to
poles, or use of conduit, owned by incumbent local
exchange carriers or electric utilities. Various
state public utility commissions and the FCC are
reviewing whether use of local partner facilities
for telecommunications purposes (as occurs when our
operating companies lease fiber optic capacity from
local partners) should entitle incumbent carriers
and electric utilities to raise pole attachment or
conduit occupancy fees. Such increased fees could
result in an increase in the amount of the lease
payments made by our operating companies to the
local partners and could have a significant adverse
impact on the profitability of our operating
companies and our results of operations.
In each of our markets, the competitive local
Competition exchange carrier services offered by us compete
principally with the services offered by the
Our operations are incumbent local telephone exchange carrier company
subject to risk because serving that area. Local telephone companies have
we compete principally long-standing relationships with their customers,
with established local have the potential to subsidize competitive
telephone companies that services from monopoly service revenues, and
have long-standing benefit from favorable state and federal
utility relationships regulations. The merger of Bell Atlantic and NYNEX
with their customers and created a very large company whose combined
pricing flexibility for territory covers a substantial portion of our
local telephone current markets. Other combinations are occurring
services. in the industry. Mergers are pending between SBC
and Ameritech, Bell Atlantic and GTE, Qwest and US
West, which may have a material adverse effect
on our ability to compete and terminate and
originate calls over our networks.
We think that local telephone companies will gain
increased pricing flexibility from regulators as
competition increases. Our operating results and
cash flow could be materially and adversely
affected by actions by regulators, including
permitting the incumbent local telephone companies
in our markets to do the following:
. lower their rates substantially;
. engage in aggressive volume and term discount
pricing practices for their customers; or
. charge excessive fees or otherwise impose on
us excessive obstacles for interconnection to
the incumbent local telephone company's
networks.
If the regional Bell
telephone companies The regional Bell operating companies can now
could get regulatory obtain regulatory approval to offer long distance
approval to offer long services if they comply with the local market
distance service in opening requirements of the federal
competition with our Telecommunications Act of 1996. To date, the FCC
significant customers, has denied the requests for approval filed by
some of our major regional Bell operating companies in our operating
customers could lose areas. However, Bell Atlantic's recent petition to
market share. provide long distance services originating in New
York may soon be approved. An approval of such a
request could result in decreased market share for
the major long distance carriers which are among
our significant customers. This could have a
material adverse effect on us.
In addition, once they obtain long distance
authority, the regional Bell operating companies
could be less cooperative in providing access to
their networks.
S-12
<PAGE>
The regional Bell
telephone companies Some of the regional Bell operating companies have
continue to seek other also recently filed petitions with the FCC
regulatory approvals requesting waivers of other obligations under the
that could significantly federal Telecommunications Act of 1996. These
enhance their involve services we also provide such as high speed
competitive position data, long distance, and services to Internet
against us. Service Providers. If the FCC grants the regional
Bell operating companies' petitions, this could
have a material adverse effect on us.
Potential competitors Our potential competitors include other competitive
to our local exchange carriers, incumbent local telephone
telecommunications companies which are not subject to regional Bell
services include the operating companies' restrictions on offering long
regional Bell telephone distance service, AT&T, MCIWorldCom, Sprint and
companies, AT&T, other long distance carriers, cable television
MCIWorldCom and Sprint, companies, electric utilities, microwave carriers,
electric utilities and wireless telecommunications providers and private
other companies that networks built by large end users. Both AT&T and
have advantages over us. MCIWorldCom offer local telephone services in some
areas of the country and are expanding their
networks. Numerous other carriers that might
otherwise use our networks to offer services are
deploying and expanding facilities that compete
with our networks. AT&T and Tele-Communications,
Inc. also recently merged, and MCIWorldCom and
Sprint announced that they will merge. Although we
have good relationships with the long distance
carriers, they could build their own facilities,
purchase other carriers or their facilities, or
resell the services of other carriers rather than
use our services when entering the market for local
exchange services.
Many of our current and potential competitors,
particularly incumbent local telephone companies,
have financial, personnel and other resources
substantially greater than our resources, as well
as other competitive advantages over us.
We Are Subject To The federal Telecommunications Act of 1996
Extensive Regulation substantially changed federal, state and local laws
and regulations governing telecommunications
The federal businesses. This law could materially affect the
Telecommunications Act growth and operation of the telephone industry and
of 1996 may have a the services we provide. There are numerous
significant impact on rulemakings that have been and continue to be
our businesses. undertaken by the FCC which will interpret and
implement the provisions of this law. These
address, or could address, a wide variety of
issues, including terms of interconnection, resale,
number portability, dialing parity, access to
buildings and rights-of-way, compensation for
exchange traffic and for originating and
terminating long distance traffic, access to
unbundled network elements, co-location at ILEC
premises, universal service subsidies, tariffing,
customer privacy, and services for the disabled.
Furthermore, portions of this law have been, and
likely other portions will be, challenged in the
courts. In addition, the federal Telecommunications
Act of 1996 removes entry barriers for all
companies and could increase substantially the
number of competitors offering comparable services
in our markets or potential markets. We cannot
predict the outcome of such rulemakings or lawsuits
or the short- and long-term effect, financial or
otherwise, of this law and FCC rulemakings on us.
Furthermore, we cannot guarantee that rules adopted
by the FCC or state regulators or other legislative
or judicial initiatives relating to the
telecommunications industry will not have a
material adverse effect on us.
S-13
<PAGE>
Although the federal Telecommunications Act of 1996
requires local telephone companies to interconnect
with and sell services to us, these interconnection
agreements may have short terms, requiring us to
renegotiate them repeatedly. Because we compete
with them in downstream markets, local telephone
companies may not provide timely or adequate
service to us which would impair our reputation
with customers who could easily change back to
using the local telephone company. In addition, the
prices we pay in these agreements may be subject to
significant increases if state public utility
commissions establish prices to pass on to
competitive local exchange carriers part of the
cost of providing universal service.
Our operating companies that provide intrastate
services are also generally subject among other
matters to certification and tariff filing
requirements by state regulators, as well as other
reporting and compliance requirements. Challenges
to our tariffs and certificates by third parties or
by the states could cause us to incur substantial
legal and administrative expense.
Risks Related To Local Local multipoint distribution service is a new
Multipoint Distribution service. Major telecommunications equipment
Service Strategy manufacturers are currently introducing products
for the local multipoint distribution service
frequency band. As a result, no wireless local loop
systems are currently operating under local
multipoint distribution service, and implementation
of such systems could be subject to unforeseen
delays, costs and possible quality and
implementation issues. Material aspects of our
local multipoint distribution service
implementation strategy are still being developed
and defined, and there can be no guarantee that we
will develop and implement a successful and
profitable local multipoint distribution service
strategy, or that implementation of our local
multipoint distribution service strategy will not
involve substantial cost.
Rapid Technological The telecommunications industry is subject to rapid
Change and significant changes in technology. While we
believe that for the foreseeable future these
changes will neither materially affect the
continued use of fiber optic telecommunications
networks nor materially hinder our ability to
acquire necessary technologies, the effect of
technological changes on our business cannot be
predicted. Thus, there can be no guarantee that
technological developments will not have a material
adverse effect on us.
Year 2000 Issues Present The year 2000 issue refers to the inability of
Risks To Our Business computerized systems and technologies to recognize
Operations In Several and process dates beyond December 31, 1999. This
Ways could present risks to the operation of our
business in several ways. Our computerized business
applications that could be adversely affected by
the year 2000 issue include:
. information processing and financial
reporting systems;
. customer billing systems;
. customer service systems;
. telecommunication transmission and reception
systems; and
. facility systems.
S-14
<PAGE>
System failure or miscalculation could result in an
inability to process transactions, send invoices,
accept customer orders or provide customers with
products and services. Although we are evaluating
the impact of the year 2000 issue on our business
and are seeking to implement necessary solutions,
this process has not been completed.
There can be no assurance that the systems of other
companies on which our systems rely will be year
2000 ready or timely converted into systems
compatible with our systems. Our failure or a
third-party's failure to become year 2000 ready, or
our inability to become compatible with third
parties with which we have a material relationship,
may have a material adverse effect on us, including
significant service interruption or outages;
however, we cannot currently estimate the extent of
any such adverse effects.
Dependence Upon Network Our success in marketing our services to business
Infrastructure, Risk Of and government users requires that we provide
System Failure Or superior reliability, capacity and security through
Security Breach our network infrastructure. Our networks are
subject to physical damage, power loss, capacity
limitations, software defects, breaches of security
(by computer virus, break-ins or otherwise) and
other factors, any of which may cause interruptions
in service or reduced capacity for our customers.
Interruptions in service, capacity limitations or
security breaches could have a material adverse
effect on us.
Dependence On Key Our growth strategy depends in large part on our
Personnel ability to attract and retain key management,
marketing and operations personnel. Currently, our
business is managed by a small number of management
and operating personnel with certain other
services, including financial and certain
accounting services, provided by Adelphia. There
can be no assurance that we will attract and retain
the qualified personnel needed to manage, operate
and further develop our business. In addition, the
loss of the services of any one or more members of
our senior management team could have a material
adverse effect on us.
Dependence On Business For the nine months ended December 31, 1998 and the
From Interexchange nine months ended September 30, 1999, approximately
Carriers 18% and 13%, respectively, of the operating
companies' combined revenues were attributable to
access services provided to MCIWorldCom and AT&T.
The loss of access revenues from interexchange
carriers in general or the loss of MCIWorldCom or
AT&T as a customer could have a material adverse
effect on our current revenue stream.
In addition, the federal Telecommunications Act of
1996 establishes procedures under which the
regional Bell operating companies can obtain
authority to compete with the interexchange
carriers in the long distance market, which could
result in a decreased market share for
interexchange carriers. Due to our operating
companies' dependence on business from
interexchange carriers, any significant loss of
market share by the interexchange carriers could
have a material adverse effect on us.
S-15
<PAGE>
We May Not Have The
Resources To Make Our current public debt indentures contain
Required Repurchases Of provisions requiring us, upon a change of control,
Our Debt If A Change Of to offer to redeem the notes issued under those
Control Occurs indentures. In the event a change of control
occurs, there is no assurance that we will have the
ability to make an offer to redeem these notes,
that we will have sufficient funds to repurchase
all of these notes or that we would be able to
obtain any additional debt or equity financing in
an amount sufficient to repurchase these notes.
Unequal Voting Rights Of We have two classes of common stock--Class A which
Stockholders carries one vote per share and Class B which
carries ten votes per share. The holders of Class B
common stock can control the outcome of matters
being voted upon by the stockholders such as the
election of directors.
It Is Unlikely You Will Adelphia Business Solutions has never declared or
Receive A Return On Your paid cash dividends on any of its common stock and
Shares Through The has no intention of doing so in the forseeable
Payment Of Cash future. As a result, it is unlikely that you will
Dividends receive a return on your shares through the payment
of cash dividends.
Purchasers Of Our Common Persons purchasing common stock will incur
Stock Will Incur immediate and substantial net tangible book value
Immediate Dilution dilution.
Future Sales Of Sales of a substantial number of shares of Class A
Outstanding Common Stock common stock or Class B common stock could
Could Adversely Affect adversely affect the market price of our Class A
The Market Price Of Our common stock and could impair our ability in the
Common Stock future to raise capital through stock offerings. If
all of our existing holders of our warrants and our
Class B common stock exercised their existing
rights as of September 30, 1999 to receive Class A
common stock, we would be required to issue
approximately an additional 32.0 million shares of
Class A common stock.
Forward-Looking The statements contained or incorporated by
Statements In This reference in this prospectus supplement that are
Prospectus Supplement not historical facts are "forward-looking
Are Subject To Risks and statements" and can be identified by the use of
Uncertainties forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "intends" or
"anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by
discussions of strategy that involve risks and
uncertainties.
Certain information included or incorporated by
reference in this prospectus supplement, is
forward-looking, such as information relating to
the effects of future regulation, future capital
commitments and the effects of competition. These
statements appear in a number of places in this
prospectus supplement and our most recent Form 10-K
and Form 10-Q, including "Summary," "Management's
Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," and include
statements regarding our intent, belief and current
expectations. Such forward-looking information
involves important risks and uncertainties that
could significantly affect expected results in the
future
S-16
<PAGE>
from those expressed in any forward-looking
statements made by, or on behalf of, us. These
risks and uncertainties include, but are not
limited to, uncertainties relating to our ability
to successfully market our services to current and
new customers, access markets on a
nondiscriminatory basis, identify, design and
construct fiber optic networks, install cable and
facilities (including switching electronics), and
obtain rights-of-way, building access rights and
any required governmental authorizations,
franchises and permits, all in a timely manner, at
reasonable costs and on satisfactory terms and
conditions, as well as risks and uncertainties
relating to general economic conditions, the cost
and availability of capital, acquisitions and
divestitures, government and regulatory policies,
the pricing and availability of equipment,
materials, and inventories, technological
developments, year 2000 issues and changes in the
competitive environment in which we operate.
Persons reading this prospectus supplement are
cautioned that such statements are only predictions
and that actual events or results may differ
materially. In evaluating such statements, readers
should specifically consider the various factors
which could cause actual events or results to
differ materially from those indicated by such
forward-looking statements.
S-17
<PAGE>
USE OF PROCEEDS
The net proceeds to us from the Class A common stock offering described on
the cover page of this prospectus supplement (the "Offering") combined with the
Adelphia Direct Placement, as defined below, will be approximately $402.8
million after deducting estimated underwriting discounts and commissions and
offering expenses.
Adelphia has entered into a stock purchase agreement to purchase at the
closing of the Offering approximately $150.0 million of our Class B common
stock at a per share price equal to the public offering price set forth on the
cover page of this prospectus supplement less the underwriting discount (the
"Adelphia Direct Placement").
We currently intend to use these net proceeds to fund our national
expansion, working capital requirements, operating losses and pro rata
investments in our networks and for general corporate purposes. We estimate
that from October 1, 1999 to December 31, 2000, our total capital requirements
will be approximately $700 million. We plan to invest a substantial portion of
proceeds in capital expenditures for:
. the national expansion;
. expanding services in existing markets;
. connecting markets with inter-city fiber optic cable; and
. purchasing electronics (including switches) for existing and new
markets.
We believe that these net proceeds, together with our existing cash balance,
internally generated funds, and vendor financing, will be sufficient to fund
our capital requirements through the fiscal quarter ending December 2000.
Management will retain a substantial amount of discretion over the application
of the net proceeds of the Offering and the Adelphia Direct Placement and there
can be no assurance that the application of net proceeds will not vary
significantly from our current plans. Pending such uses, the net proceeds will
be invested in short term investments.
We intend to evaluate potential acquisitions as a means to further develop
our market presence and product offerings. We have no definite agreement with
respect to any acquisition, although from time to time we have discussions with
other companies and assess opportunities on an ongoing basis. A portion of the
net proceeds from the Offering and the Adelphia Direct Placement may also be
used to finance acquisitions.
S-18
<PAGE>
CAPITALIZATION
(dollars in thousands, except par value amounts)
The following table sets forth our cash and cash equivalents and
capitalization as of September 30, 1999, on an actual and as adjusted basis to
reflect the Offering and the Adelphia Direct Placement. This table should be
read in conjunction with Adelphia Business Solutions' (formerly known as
Hyperion Telecommunications, Inc.) consolidated financial statements and
related notes thereto and other financial data contained elsewhere or
incorporated by reference in this prospectus supplement.
<TABLE>
<CAPTION>
September 30, 1999
---------------------------
Actual As Adjusted (b)
---------- ---------------
<S> <C> <C>
Cash and cash equivalents........................... $ 125,988 $ 528,788
U.S. government securities--pledged................. 29,451 29,451
---------- ----------
Total cash, cash equivalents and U.S. government
securities--pledged.............................. $ 155,439 $ 558,239
========== ==========
Long-term debt including current maturities:
13% Senior Discount Notes due 2003................ $ 245,052 $ 245,052
12 1/4% Senior Secured Notes due 2004............. 250,000 250,000
12% Senior Subordinated Notes due 2007............ 300,000 300,000
Other debt........................................ 44,056 44,056
---------- ----------
Total long-term debt including current
maturities..................................... 839,108 839,108
---------- ----------
12 7/8% Senior exchangeable redeemable preferred
stock due 2007..................................... 252,261 252,261
---------- ----------
Common stock and other stockholders'
equity (deficiency) (a):
Class A common stock, $.01 par value, 800,000,000
shares authorized; 23,912,785 shares outstanding
on an Actual basis and 32,662,785 shares
outstanding on an As Adjusted basis.............. 239 327
Class B common stock, $.01 par value, 400,000,000
shares authorized; 31,181,077 shares outstanding
on an Actual basis and 36,362,427 shares
outstanding on an As Adjusted basis.............. 312 364
Additional paid-in capital.......................... 269,608 672,268
Class B common stock warrants....................... 4,467 4,467
Unearned stock compensation......................... (6,126) (6,126)
Accumulated deficit................................. (330,864) (330,864)
---------- ----------
Total common stock and other stockholders' equity
(deficiency)....................................... (62,364) 340,436
---------- ----------
Total capitalization................................ $1,029,005 $1,431,805
========== ==========
</TABLE>
- --------
(a) Authorized share amounts give effect to the amendments to our Certificate
of Incorporation that were approved at our annual stockholders' meeting
and effective on October 25, 1999. Actual Class A and Class B common stock
authorized as of September 30, 1999 was 300,000,000 shares and 150,000,000
shares, respectively.
(b) Gives effect to the application of the net proceeds of (i) approximately
$252.8 million from the Offering as described in "Use of Proceeds" and
(ii) approximately $150.0 million from the Adelphia Direct Placement.
S-19
<PAGE>
PRICE RANGE OF ADELPHIA BUSINESS SOLUTIONS' COMMON EQUITY
AND DIVIDEND POLICY
Our Class A common stock is quoted on the Nasdaq National Market under the
symbol "ABIZ." Prior to October 27, 1999, our Class A common stock was quoted
on the Nasdaq National Market under the symbol "HYPT."
The following table sets forth the range of high and low closing sale prices
of the Class A common stock for the fiscal periods indicated, as reported by
the Nasdaq National Market.
Class A common stock
<TABLE>
<CAPTION>
High Low
-------- -------
1998
<S> <C> <C>
Second Quarter Ended (from 5/8/98 to 6/30/98).......... $19 7/16 $12 3/4
Third Quarter Ended 9/30/98............................ $17 1/4 $ 5 1/2
Fourth Quarter Ended 12/31/98.......................... $15 7/8 $ 3 1/2
<CAPTION>
1999
<S> <C> <C>
First Quarter Ended 3/31/99............................ $17 $ 8 3/8
Second Quarter Ended 6/30/99 .......................... $20 1/2 $10 1/2
Third Quarter Ended 9/30/99............................ $25 5/8 $14 3/4
Fourth Quarter (through 11/23/99)...................... $35 3/8 $24 1/8
</TABLE>
As of November 22, 1999, approximately 172 holders of record held our Class
A common stock. As of that date, five record holders were registered clearing
agencies holding Class A common stock on behalf of participants in such
clearing agencies.
No established public trading market exists for our Class B common stock. As
of November 22, 1999, the Class B common stock was held of record by Adelphia
and 31 other holders. The Class B common stock is convertible into shares of
Class A common stock on a one-to-one basis. As of November 22, 1999, Adelphia
owned approximately 92% of the outstanding Class B common stock.
Dividend Policy
We have never paid a cash dividend on our common stock and anticipate that
for the foreseeable future any earnings will be retained for use in our
business. Our ability to pay cash dividends on our common stock is limited by
the provisions of our indentures.
S-20
<PAGE>
DILUTION
The net tangible book value of our common stock as of September 30, 1999 was
a deficit of approximately $106,969,000 or negative $1.93 a share. Net tangible
book value per share represents the amount of our common stock and other
stockholders' equity (deficiency), less intangible assets, divided by shares of
our common stock outstanding. Purchasers of Class A common stock will have an
immediate dilution of net tangible book value which, due to our having a net
tangible book value deficit, will exceed the purchase price per share.
Net tangible book value dilution per share represents the difference between
the amount per share paid by purchasers of shares of Class A common stock in
the Offering and the pro forma net tangible book value per share of the common
stock immediately after completion of the Offering, but excluding the Adelphia
Direct Placement. After giving effect to the sale by us of 8,750,000 shares of
Class A common stock in the Offering at the public offering price of $30.00 per
share, and after deduction of underwriting discounts and commissions and
estimated offering expenses, our pro forma net tangible book value as of
September 30, 1999 was approximately $145,831,000 or $2.27 per share of common
stock. This represents an immediate increase in net tangible book value of
$4.20 per share to existing stockholders and an immediate dilution of net
tangible book value of $27.73 per share to purchasers of Class A common stock
in the Offering, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Public offering price per share of Class A common stock........ $ 30.00
Net tangible book value per share of common stock before
the Offering................................................ $(1.93)
Increase per share of common stock attributable to the
Offering.................................................... 4.20
------
Pro forma net tangible book value per share of common stock
after the Offering............................................ 2.27
-------
Net tangible book value dilution per share..................... $(27.73)
=======
</TABLE>
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<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Class A
common stock applicable to "Non-United States Holders." A "Non-United States
Holder" is any beneficial owner of Class A common stock that, for United States
federal income tax purposes, is a non-resident alien individual, a foreign
corporation, a foreign partnership or a non-resident fiduciary of a foreign
estate or trust as such terms are defined in the Code. This discussion is based
on the Code and administrative and judicial interpretations as of the date
hereof, all of which are subject to change either retroactively or
prospectively. This discussion does not address all aspects of United States
federal income and estate taxation that may be relevant to Non-United States
Holders in light of their particular circumstances (for example, insurance
companies, tax exempt organizations, financial institutions, broker-dealers or
certain U.S. expatriates) and does not address any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction. Prospective
investors are urged to consult with their tax advisors regarding the United
States federal, state and local income and other tax consequences, and the non-
United States tax consequences, of owning and disposing of Class A common
stock.
Dividends
Subject to the discussion below, any dividend paid to a Non-United States
Holder generally will be subject to United States withholding tax either at a
rate of 30% of the gross amount of the dividend or such lower rate as may be
specified by an applicable income tax treaty. For purposes of determining
whether tax is to be withheld at a 30% rate or at a reduced rate as specified
by an income tax treaty, we will ordinarily presume that dividends paid to an
address in a foreign country are paid to a resident of such country absent
knowledge that such presumption is not warranted. However, under United States
Treasury regulations not currently in effect, a Non-United States Holder would
be required to file certain forms accompanied by a statement from a competent
authority of the treaty country in order to claim the benefits of a tax treaty.
Dividends paid to a holder with an address within the United States generally
will not be subject to this withholding tax, unless we have actual knowledge
that the holder is a Non-United States Holder.
Dividends received by a Non-United States Holder that are effectively
connected with a United States trade or business conducted by such Non-United
States Holder are exempt from withholding tax. However, such effectively
connected dividends are subject to regular United States income tax in the same
manner as if the Non-United States Holder were a United States resident. A Non-
United States Holder may claim exemption from withholding under the effectively
connected income exception by filing Form 4224 (Statement Claiming Exemption
from Withholding of Tax on Income Effectively Connected With the Conduct of
Business in the United States) each year with us or its paying agent prior to
the payment of the dividends for such year. Effectively connected dividends
received by a corporate Non-United States Holder may be subject to an
additional "branch profits tax" at a rate of 30% (or such lower rate as may be
specified by an applicable tax treaty) of such corporate Non-United States
Holder's effectively connected earnings and profits, subject to certain
adjustments. To the extent a distribution exceeds current or accumulated
earnings or profits, it will be treated first as a return of the holder's basis
to the extent thereof, and then as a gain from the sale of a capital asset. Any
withholding tax on distributions in excess of our current and accumulated
earnings and profits is refundable to the Non-United States Holder upon filing
an appropriate claim with the United States Internal Revenue Service (the
"IRS").
A Non-United States Holder eligible for a reduced rate of United States
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts currently withheld by filing an appropriate claim for refund with the
IRS.
Gain on Disposition of Ordinary Common Stock
A Non-United States Holder generally will not be subject to United States
federal income tax with respect to a gain realized upon the sale or a
disposition of Class A common stock unless: (i) such gain is effectively
S-22
<PAGE>
connected with a United States trade or business of the Non-United States
Holder, (ii) the Non-United States Holder is an individual who is present in
the United States for a period or periods aggregating 183 days or more during
the taxable year in which such sale or disposition occurs and certain other
conditions are met, or (iii) we are or have been a "United States real property
holding corporation" within the heading of Section 897(c)(2) of the Code at any
time within the shorter of the five-year period preceding such disposition or
such holder's holding period and certain other conditions are met. We believe
that it is not, and has not been for the last five years, a "United States real
property holding corporation" for federal income tax purposes. If a Non-United
States Holder falls under clause (i) above, the Non-United States holder will
be taxed on the net gain derived from the sale under regular graduated United
States federal income tax rates (and, with respect to corporate Non-United
States Holders, may also be subject to the branch profits tax described above).
If an individual Non-United States Holder falls under clause (ii) above, the
Non-United States Holder generally will be subject to a 30% tax on the gain
derived from the sale, which gain may be offset by United States capital losses
recognized within the same taxable year of such sale.
Backup Withholding and Information Reporting
Generally, we must report to the IRS the amount of dividends paid, the name
and address of the recipient, and the amount, if any, of tax withheld. A
similar report is sent to the holder. Pursuant to tax treaties or other
agreements, the IRS may make its reports available to tax authorities in the
recipient's country of residence.
Unless we have actual knowledge that a holder is a non-United States person,
dividends paid to a holder at an address within the United States may be
subject to backup withholding at a rate of 31% if the holder is not an exempt
recipient as defined in Treasury Regulation Section 1.6049-4(c)(1)(ii) (which
includes corporations) and fails to provide a correct taxpayer identification
number and other information to us. Backup withholding will generally not apply
to dividends paid to holders at an address outside the United States (unless we
have knowledge that the holder is a United States person.)
If the proceeds of the disposition of Class A common stock by a Non-United
States Holder are paid over, by or through a United States office of a broker,
the payment is subject to information reporting and to backup withholding at a
rate of 31% unless the disposing holder certifies as to its name, address and
status as a Non-United States Holder under penalties of perjury or otherwise
establishes an exemption. Generally, United States information reporting and
backup withholding will not apply to a payment of disposition proceeds if the
payment is made outside the United States through a non-United States office of
a non-United States broker. However, United States information reporting
requirements (but not backup withholding) will apply to a payment of
disposition proceeds outside the United States if (a) the payment is made
through an office outside the United States of a broker that is either (i) a
United States person for United States federal income tax purposes, (ii) a
"controlled foreign corporation" for United States federal income tax purposes,
or (iii) a foreign person which derives 50% or more of its gross income for
certain periods from the conduct of a United States trade or business, and (b)
the broker fails to maintain documentary evidence in its files that the holder
is a Non-United States Holder and that certain conditions are met or that the
holder otherwise is entitled to an exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to 31% backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the IRS.
New regulations relating to withholding tax on income paid to foreign
persons (the "New Withholding Regulations") will generally be effective for
payments made after December 31, 2000, subject to certain transition rules. The
New Withholding Regulations modify and, in general, unify the way in which you
establish your status as a non-United States "beneficial owner" eligible for
withholding exemptions including a
S-23
<PAGE>
reduced treaty rate or an exemption from backup withholding. For example, the
New Withholding Regulations will require new forms, which you generally will
have to provide earlier than you would have had to provide replacements for
expiring existing forms.
Estate Tax
An individual Non-United States Holder who is treated as the owner of Class
A common stock at the time of his or her death or has made certain lifetime
transfers of an interest in Class A common stock will be required to include
the value of such Class A common stock in his or her gross estate for United
States federal estate tax purposes and may be subject to United States federal
estate tax, unless an applicable estate tax treaty provides otherwise.
S-24
<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and we have agreed to sell to such underwriter, the number of shares
set forth opposite the name of such underwriter:
<TABLE>
<CAPTION>
Number
Name of Shares
---- ---------
<S> <C>
Salomon Smith Barney Inc........................................ 1,459,050
Credit Suisse First Boston Corporation.......................... 1,459,050
Donaldson, Lufkin & Jenrette Securities Corporation............. 1,459,050
Goldman, Sachs & Co............................................. 1,459,050
Banc of America Securities LLC.................................. 728,450
CIBC World Markets Corp......................................... 728,450
Credit Lyonnais Securities (USA) Inc............................ 728,450
First Union Securities, Inc..................................... 728,450
---------
Total.......................................................... 8,750,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in the Offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.
The underwriters propose to offer some of the shares directly to the public
at the public offering price set forth on the cover page of this prospectus
supplement and some of the shares to certain dealers at the public offering
price less a concession not in excess of $0.63 per share. The underwriters may
allow, and such dealers may reallow, a concession not in excess of $0.10 per
share on sales to certain other dealers. After the initial offering of the
shares to the public, the public offering price and such concessions may be
changed by the underwriters.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus supplement, to purchase up to 1,312,500 additional
shares of Class A common stock at the public offering price less the
underwriting discount. The underwriters may exercise such option solely for the
purpose of covering over-allotments, if any, in connection with the Offering.
To the extent such option is exercised, each underwriter will be obligated,
subject to certain conditions, to purchase a number of additional shares
approximately proportionate to such underwriter's initial purchase commitment.
We have agreed that, for a period of 90 days after the date of this
prospectus supplement, we will not, without the prior consent of Salomon Smith
Barney Inc., offer, sell, contract to sell or otherwise dispose of any shares
of Class A common stock or any securities convertible into or exercisable or
exchangeable for Class A common stock or grant any options or warrants to
purchase shares of Class A common stock (except in connection with strategic
acquisitions, issuances pursuant to existing agreements, and certain other
permitted transactions).
The common stock is quoted on the Nasdaq National Market under the symbol
"ABIZ."
S-25
<PAGE>
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us in connection with the Offering. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share....................................... $ 1.05 $ 1.05
Total........................................... $9,187,500 $10,565,625
</TABLE>
In connection with the Offering, the underwriters may over-allot, or engage
in syndicate covering transactions, stabilizing transactions and penalty bids.
Over-allotment involves syndicate sales of common stock in excess of the number
of shares to be purchased by the underwriters in the Offering, which creates a
syndicate short position. Syndicate covering transactions involve purchases of
the common stock in the open market after the distribution has been completed
in order to cover syndicate short positions. Stabilizing transactions consist
of certain bids or purchases of common stock made for the purpose of preventing
or retarding a decline in the market price of the common stock while the
offering is in progress. Penalty bids permit the underwriters to reclaim a
selling concession from a syndicate member when the underwriters, in covering
syndicate short positions or making stabilizing purchases, repurchase shares
originally sold by that syndicate member. These activities may cause the price
of the common stock to be higher than the price that otherwise would exist in
the open market in the absence of such transactions. These transactions may be
effected on the Nasdaq National Market or in the over-the-counter market, or
otherwise and, if commenced, may be discontinued at any time.
In addition, in connection with the Offering, certain of the underwriters
(and selling group members) may engage in passive market making transactions in
the common stock on the Nasdaq National Market, prior to the pricing and
completion of the Offering. Passive market making consists of displaying bids
on the Nasdaq National Market no higher than the bid prices of independent
market makers and making purchases at prices no higher than those independent
bids and effected in response to order flow. Net purchases by a passive market
maker on each day are limited to a specified percentage of the passive market
maker's average daily trading volume in the common stock during a specified
period and must be discontinued when such limit is reached. Passive market
making may cause the price of the common stock to be higher than the price that
otherwise would exist in the open market in the absence of such transactions.
If passive market making is commenced, it may be discontinued at any time.
We estimate that our total expenses of the Offering will be $500,000.
Certain of the underwriters have performed certain investment banking and
advisory services for us from time to time for which they have received
customary fees and expenses. The underwriters may, from time to time, engage in
transactions with and perform services for us in the ordinary course of their
business.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
the underwriters may be required to make in respect of any of those
liabilities.
It is expected that delivery of the Class A common stock will be made
against payment therefor on or about the date specified in the last paragraph
of the cover page of this prospectus supplement, which will be the fourth
business day following the date hereof. Under Rule 15c6-1 of the Commission
under the Exchange Act, trades in the secondary market generally are required
to settle in three business days, unless the parties to any such trade
expressly agree otherwise. Purchasers of Class A common stock who wish to trade
Class A common stock on the date hereof or the next three succeeding business
days should consult their own advisor.
S-26
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, as well as proxy statements
and other information with the SEC. You may read and copy any document we file
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at its Regional Offices in Chicago, Illinois or New
York, New York. You may obtain further information about the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are
also available to the public over the Internet at the SEC's web site at
http://www.sec.gov, which contains reports, proxy statements and other
information regarding registrants like us that file electronically with the
SEC.
This prospectus supplement is part of a registration statement on Form S-3
filed by us with the SEC under the Securities Act. As permitted by SEC rules,
this prospectus supplement does not contain all of the information included in
the registration statement and the accompanying exhibits filed with the SEC.
You may refer to the registration statement and its exhibits for more
information.
The SEC allows us to "incorporate by reference" into this prospectus
supplement the information we file with the SEC. This means that we can
disclose important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus supplement. If we subsequently file updating or superseding
information in a document that is incorporated by reference into this
prospectus supplement, the subsequent information will also become part of this
prospectus supplement and will supersede the earlier information.
We are incorporating by reference the following documents that we have filed
with the SEC:
. our Transition Report on Form 10-K for the nine months ended December
31, 1998 as amended by Form 10-K/A. We refer to this Transition Report
on Form 10-K in this prospectus supplement as the Form 10-K.
. our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999, June 30, 1999 and September 30, 1999;
. our definitive proxy statement dated October 4, 1999, with respect to
the Annual Meeting of Stockholders held on October 25, 1999;
. our Current Reports on Form 8-K for the events dated February 16, 1999,
February 25, 1999, March 30, 1999, September 21, 1999 and October 25,
1999; and
. the description of our Class A common stock contained in our
registration statement filed with the SEC under Section 12 of the
Securities Exchange Act of 1934 and subsequent amendments and reports
filed to update such description.
We are also incorporating by reference into this prospectus supplement all
of our future filings with the SEC under Sections 13(a), 13(c), 14, or 15(d) of
the Securities Exchange Act of 1934 until the Offering has been completed.
You may obtain a copy of any of our filings that are incorporated by
reference, at no cost, by writing to or telephoning us at the following
address:
Adelphia Business Solutions, Inc.
One North Main Street
Coudersport, Pennsylvania 16915
Attention: Investor Relations
Telephone: (814) 274-9830
You should rely only on the information provided in this prospectus
supplement or incorporated by reference. We have not authorized anyone to
provide you with different information. You should not assume that the
information in this prospectus supplement is accurate as of any date other than
the date on the cover of this prospectus supplement. We are not making this
offer of securities in any state or country in which the offer or sale is not
permitted.
S-27
<PAGE>
LEGAL MATTERS
The validity of the Class A common stock offered through this prospectus
supplement will be passed upon for us by Buchanan Ingersoll Professional
Corporation, Pittsburgh, Pennsylvania. Attorneys of that firm who are
representing us in the Offering own an aggregate of 16,460 shares of our Class
A common stock. The validity of the Class A common stock offered hereby will be
passed upon on behalf of the underwriters by Latham & Watkins, New York, New
York.
EXPERTS
The consolidated financial statements of Adelphia Business Solutions
(formerly known as Hyperion Telecommunications, Inc.) as of March 31, 1998 and
December 31, 1998, and for each of the years ended March 31, 1997 and 1998 and
the nine months ended December 31, 1998, all incorporated in this prospectus
supplement by reference from Adelphia Business Solutions' Transition Report on
Form 10-K for the nine months ended December 31, 1998 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
S-28
<PAGE>
Prospectus
ADELPHIA BUSINESS SOLUTIONS, INC.
Debt Securities
Preferred Stock
Depositary Shares
Class A Common Stock
Class B Common Stock
Other Equity Securities
This prospectus relates to:
. Adelphia Business Solutions, Inc.'s debentures, notes and other debt
securities in one or more series which may be senior debt securities or
subordinated debt securities,
. shares of our preferred stock issuable in series designated by our board of
directors,
. fractional interests represented by depositary shares in shares of our
preferred stock issuable in series designated by our board of directors,
. shares of our Class A common stock,
. shares of our Class B common stock, which may be offered in combination or
separately from time to time by us, and
. other equity securities such as stock purchase contracts or rights to
purchase our preferred stock, Class A common stock or Class B common stock
or other interests in the equity of Adelphia Business Solutions.
The aggregate initial offering price of all of the securities which may be
sold pursuant to this prospectus will not exceed U.S. $1,500,000,000, or its
equivalent based on the applicable exchange rate at the time of issue in one or
more foreign currencies or currency units as shall be designated by Adelphia
Business Solutions.
The Class A common stock is quoted on the Nasdaq National Market. As of
October 27, 1999, the Class A common stock's ticker symbol will be "ABIZ."
Prior to October 27, 1999, the Class A common stock's ticker symbol was "HYPT."
On October 25, 1999, we changed our name to Adelphia Business Solutions, Inc.
from Hyperion Telecommunications, Inc., our former name. On October 12, 1999,
the closing sale price on the Nasdaq National Market of a single share of our
Class A common stock was $28.25.
Our common stock includes Class A and Class B common stock. The rights of
holders of the Class A common stock and Class B common stock are the same
except that Class B common stock holders have 10 votes per share and have the
right to convert their shares of Class B common stock into Class A common
stock.
You should carefully review "Risk Factors" beginning on page 3 for a
discussion of matters you should consider when investing in securities of
Adelphia Business Solutions.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
This Prospectus May Not Be Used To Consummate Sales Of Securities Unless
Accompanied By A Prospectus Supplement.
----------------
The date of this Prospectus is October 25, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Adelphia Business Solutions............................................................ 2
Risk Factors........................................................................... 3
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.............. 13
Dilution............................................................................... 13
Use of Proceeds........................................................................ 13
Description of Debt Securities......................................................... 13
Description of Capital Stock........................................................... 24
Book Entry Issuance.................................................................... 28
Plan of Distribution................................................................... 30
Where You Can Find More Information.................................................... 31
Legal Matters.......................................................................... 32
Experts................................................................................ 32
</TABLE>
<PAGE>
SUMMARY
"We," "our," "ours," "us" or "Adelphia Business Solutions" means Adelphia
Business Solutions, Inc. together with its majority-owned subsidiaries, except
where the context otherwise requires. Unless the context otherwise requires,
references to the networks mean the telecommunications networks in operation or
under construction owned as of June 30, 1999 which are wholly and majority-
owned subsidiaries of Adelphia Business Solutions or joint ventures managed by
Adelphia Business Solutions and in which Adelphia Business Solutions holds less
than a majority equity interest with one or more other partners, and the
additional networks under development as of such date. This summary may not
contain all the information that may be important to you. You should read the
entire prospectus and those documents incorporated by reference into this
document, including the risk factors, financial data and related notes, before
making an investment decision.
Adelphia Business Solutions
We are an integrated communications services provider in the eastern United
States. This means that we provide our customers with alternatives to the
incumbent local telephone company for local telephone and other
telecommunications services. Adelphia Business Solutions' telephone operations
are referred to as being facilities based, which means we generally own a large
portion of the local telecommunications networks and facilities we use to
deliver these services, rather than leasing or renting the use of another
party's networks to do so. We offer a full range of communications services to
customers that include businesses, governmental and educational end users and
other telecommunications service providers. Our communications services include
local switch dial tone (also known as local phone service), long distance
service, high speed data services, and Internet connectivity. The customer has
a choice of receiving these services individually or as part of a bundle of
services. In order to take advantage of the improved economic returns from
providing services over our own network system, we are in the process of
significantly expanding the reach of our network system. This network system
expansion, which will allow us to offer our services in over 200 markets
throughout the continental United States, includes the purchase, lease or
construction of fiber optic network facilities in more than 160 new markets and
the interconnection of all of our existing and new markets with our own fiber
optic network facilities. As of June 30, 1999, we managed and operated
telecommunications networks serving 40 metropolitan statistical areas.
On October 25, 1999, we changed our name to Adelphia Business Solutions,
Inc. from Hyperion Telecommunications, Inc., our former name. As of October 27,
1999, Adelphia Business Solutions' Class A common stock will be quoted on the
Nasdaq National Market under the symbol "ABIZ." Prior to October 27, 1999, our
Nasdaq National Market ticker symbol was "HYPT."
Our executive offices are located at One North Main Street, Coudersport,
Pennsylvania 16915, and our telephone number is (814) 274-9830.
Recent Developments
Please see the applicable prospectus supplement and Adelphia Business
Solutions' recent public filings for recent developments.
2
<PAGE>
RISK FACTORS
Before you invest in Adelphia Business Solutions' securities, you should be
aware that there are various risks, including those described below. You should
consider carefully these risk factors together with all of the other
information included in this prospectus before you decide to purchase any
securities of Adelphia Business Solutions.
High Level Of
Indebtedness
As of June 30, 1999, Adelphia Business Solutions has a substantial
we owed approximately amount of debt. We borrowed this money to purchase
$1.1 billion. Our high and to expand our telecommunications systems and
level of indebtedness other operations and, to a lesser extent, for
can have important investments and loans to our affiliates. At June
adverse consequences to 30, 1999, our indebtedness and redeemable preferred
us and to you. stock totaled approximately $1,121,878,000. This
included approximately:
. $236,745,000 of 13% senior discount notes due
2003;
. $250,000,000 of 12 1/4% senior secured notes
due 2004 which are secured by the equity we
own in some of our telephone networks;
. $300,000,000 of 12% senior subordinated notes
due 2007; and
. $244,153,000 of redeemable preferred stock
due October 15, 2007.
Commencing 1999 we We will have to start funding cash payments on
will have to begin these debts as follows:
funding substantial cash
payments.
. commencing May 1, 1999--semi-annual interest
payments of $18,000,000 on the 12% senior
subordinated notes;
. commencing March 1, 2001--semi-annual
interest payments of $15,300,000 on our 12
1/4% senior secured notes due 2004;
. commencing October 15, 2001--semi-annual
interest payments of $19,800,000 on our 13%
senior discount notes due 2003;
. commencing October 15, 2002--quarterly cash
dividends of approximately $12,200,000 on our
redeemable preferred stock.
This could affect our
ability to invest in our Our high level of indebtedness can have important
business in the future adverse consequences to us and to you. In the
as well as our ability future it will require that we spend a substantial
to react to changes in portion of the cash we get from our business to
our industry or economic repay the principal and interest on these debts.
downturns. Otherwise, we could use these funds for general
corporate purposes or for capital improvements. Our
ability to obtain new loans for working capital,
capital expenditures, acquisitions or capital
improvements may be limited by our current level of
debt. In addition, having such a high level of debt
could limit our ability to react to changes in our
industry and to economic conditions generally and
may put us at a competitive disadvantage to
competitors who have lower debt levels.
3
<PAGE>
Subordinated Notes Are
Subordinated To Our If we issue subordinated notes, these notes will be
Other Borrowings subordinated in right of payment to all of our
current and future senior debt. Upon any
In the event of a distribution to our creditors in a liquidation or
bankruptcy, subordinated dissolution of Adelphia Business Solutions or in a
noteholders may receive bankruptcy, reorganization, insolvency,
less than other receivership or similar proceeding relating to us
creditors because senior or our property, the holders of senior debt will be
creditors are entitled entitled to be paid in full before any payment may
to be paid in full be made with respect to subordinated notes. In the
before subordinated event of a bankruptcy, liquidation or
noteholders receive any reorganization of Adelphia Business Solutions,
payment. holders of subordinated notes will participate
ratably with all holders of existing subordinated
indebtedness of Adelphia Business Solutions that is
deemed to be of the same class as the subordinated
notes, and potentially with all other general
creditors of Adelphia Business Solutions, based
upon the respective amounts owed to each holder or
creditor, in the remaining assets of Adelphia
Business Solutions. We cannot guarantee that there
would be sufficient assets to pay amounts due on
the subordinated notes. As a result, holders of
subordinated notes may receive less, ratably, than
the holders of senior debt. Senior creditors may
also have the right upon a default under their loan
agreements to block payments being made to holders
of subordinated notes. The subordination provisions
will be described in the applicable prospectus
supplement for the subordinated notes. As of June
30, 1999, the aggregate amount of our senior debt
was approximately $486.7 million.
Our Business Requires Our business requires substantial additional
Substantial Additional financing on a continuing basis for capital
Financing And If We Do expenditures and other purposes including:
Not Obtain That
Financing, We May Not Be
Able To Expand Our
Networks, Offer
Services, Make Payments
When Due or Refinance
Existing Debt.
. installing additional electronics and
computers in our telephone networks that
route a telephone caller to the number he or
she dialed,
. expanding our Network Operations and Control
Center and improving our existing telephone
networks,
. designing, constructing and developing, or
acquiring, new telephone networks,
. continued purchasing of our partners'
interests in the telephone networks we do not
wholly own, and
. scheduled principal and interest payments on
our debt.
There can be no guarantee that we will be able to
issue additional debt or sell stock or other
additional equity on satisfactory terms, or at all,
to meet our future financing needs.
We Have Had Large We have incurred substantial net losses for each
Losses, And We Expect year of operations since our inception in 1991. Our
This To Continue recent net losses applicable to our common
stockholders were approximately as follows:
. fiscal year ended March 31, 1996--
$13,620,000;
. fiscal year ended March 31, 1997--
$30,547,000;
. fiscal year ended March 31, 1998--
$81,491,000;
. nine months ended December 31, 1998--
$95,302,000; and
. six months ended June 30, 1999--$82,539,000.
4
<PAGE>
Our earnings have
been insufficient to pay Our earnings could not pay for our combined fixed
for our fixed charges charges and preferred stock dividends during these
and preferred stock periods by the amounts set forth in the table
dividends below.
<TABLE>
<CAPTION>
Earnings
Deficiency
------------
<S> <C>
.fiscal year ended March 31, 1997 $ 30,288,000
.fiscal year ended March 31, 1998 $ 85,762,000
.nine months ended December 31, 1998 $105,525,000
.six months ended June 30, 1999 $ 90,046,000
</TABLE>
If we cannot Historically, we have depended on getting
refinance our debt or additional borrowings and selling equity to meet
obtain new loans, we our cash needs. Although in the past we have been
would likely have to able to obtain additional borrowings and sell
consider various options equity, there can be no guarantee that we will be
such as the sale of able to do so in the future or that the cost to us
additional equity or or the other terms which would affect us would be
some of our assets to as favorable to us as our current indentures. The
meet the principal and covenants in our indentures for our current debt
interest payments we limit our ability to borrow more money.
owe, negotiate with our
lenders to restructure
existing loans or
explore other options
available under
applicable laws
including those under
reorganization or
bankruptcy laws. We
cannot guarantee that
any options available to
us would enable us to
repay our debt in full.
Holding Company Adelphia Business Solutions directly owns no
Structure significant assets other than stock, partnership
interests, equity and other interests in its
Adelphia Business operating companies. Adelphia Business Solutions
Solutions depends on its does not receive cash flow from operations except
subsidiaries' and joint to the extent that its operating companies pay
ventures' cash payments management fees or make distributions to it. In the
and distributions to event of an insolvency of an operating company,
fund its cash needs. creditors of that operating company would be
entitled to be paid in full before dividends or
other distributions would be made to Adelphia
Business Solutions. In addition, Adelphia Business
Solutions does not own a controlling interest in
some of these operating companies. This business
structure creates risks regarding Adelphia Business
Solutions' obtaining cash from its business
operations which could adversely affect its ability
to repay the interest and principal which it owes,
to get new loans, to fund future development of
existing networks and new networks and to pay cash
dividends to its common stockholders in the future.
New Service Acceptance We are in the process of introducing a number of
By Customers services, primarily local exchange services, that
we believe are important to our long-term growth.
The success of these services will be dependent
upon, among other things, the willingness of
customers to accept us as a new provider of such
new telecommunications services. There is no
guarantee that this acceptance will occur, and the
lack of this acceptance could have a material
adverse effect on Adelphia Business Solutions.
5
<PAGE>
Risks From Rapid
Expansion We are in a period of rapid expansion which we
believe will continue and may even accelerate in
the foreseeable future. The operating complexity of
Adelphia Business Solutions, as well as the
responsibilities of management personnel, have
increased as a result of this expansion. Our
ability to manage this growth effectively will
require us to continue to expand and improve our
operational and financial systems and to expand,
train and manage our employee base. In addition,
Adelphia Business Solutions and its operating
companies have significantly increased, and intend
to continue, the hiring of additional sales and
marketing personnel. We cannot guarantee that these
new personnel will be successfully integrated into
Adelphia Business Solutions or the operating
companies or that we can hire a sufficient number
of qualified personnel. Our inability to
effectively manage the hiring of additional
personnel and expansion could have a material
adverse effect on our business and results of
operations.
The expansion of Adelphia Business Solutions is
also dependent upon the expansion of our fiber
optic network through the continued acquisition of
indefeasible rights of use (IRUs) for local and
long-haul fiber optic plant or Adelphia Business
Solutions built fiber optic plant when IRUs are not
available or cost justified. If new IRUs cannot be
obtained or if such fiber optic plant is not
delivered or built by Adelphia Business Solutions
on a timely basis, the development of the new
markets and the interconnection of existing and new
networks may be delayed, which could have a
material adverse effect on Adelphia Business
Solutions.
Control By Adelphia As of June 30, 1999, Adelphia Communications
Communications Corporation beneficially owned shares representing
Corporation about 66% of the total number of outstanding shares
of both classes of our common stock and about 90%
Adelphia can control of the total number of outstanding shares of our
and can transfer control Class B common stock. As a result of Adelphia's
of stockholder decisions stock ownership, Adelphia has the power to elect
on very important all of our directors. In addition, Adelphia could
matters. control stockholder decisions on other matters such
as amendments to our Certificate of Incorporation
and Bylaws, and mergers or other fundamental
corporate transactions. Adelphia could also
transfer control of Adelphia Business Solutions to
an unrelated third person by transferring our Class
B common stock.
There Are Potential Adelphia's activities could present a conflict of
Conflicts Of Interest interest with us, such as pursuing business
Between Adelphia opportunities in the telecommunications industry.
Business Solutions And In addition, there have been and will continue to
Adelphia Communications be transactions between us and Adelphia or the
Corporation other entities or persons they own or have
affiliations with. Our debt indentures contain
covenants that place some restrictions on
transactions between us and our affiliates.
Need To Obtain Permits We expect that in connection with our planned
And Rights-of-Way construction and development of new networks that
we must obtain and maintain permits and rights-of-
way for the cabling needed to develop and operate
such networks. In addition, we may require pole
attachment or conduit use
6
<PAGE>
agreements with incumbent local exchange carriers,
utilities or other local exchange carriers to
operate existing networks and new networks. There
is no guarantee that Adelphia Business Solutions,
its operating companies, its local partners, or
Adelphia will be able to obtain new permits and
rights-of-way, pole attachment and conduit use, to
maintain existing permits and rights-of-way or to
obtain and maintain the other permits and rights-
of-way needed to develop and operate existing
networks and new networks. Failure to obtain or
maintain necessary permits, rights-of-way and
agreements could have a material adverse effect on
Adelphia Business Solutions' ability to operate and
expand its networks.
In addition, the amount of lease payments made by
our operating companies could be affected by the
costs our local partners incur for attachments to
poles, or use of conduit, owned by incumbent local
exchange carriers or electric utilities. Various
state public utility commissions and the FCC are
reviewing whether use of local partner facilities
for telecommunications purposes (as occurs when our
operating companies lease fiber optic capacity from
local partners) should entitle incumbent local
exchange carriers and electric utilities to raise
pole attachment or conduit occupancy fees. Such
increased fees could result in an increase in the
amount of the lease payments made by our operating
companies to the local partners and could have a
significant adverse impact on the profitability of
our operating companies and our results of
operations.
Competition
In each of our markets, the competitive local
Adelphia Business exchange carrier services offered by us compete
Solutions' operations principally with the services offered by the
are subject to risk incumbent local telephone exchange carrier company
because Adelphia serving that area. Local telephone companies have
Business Solutions long-standing relationships with their customers,
competes principally have the potential to subsidize competitive
with established local services from monopoly service revenues, and
telephone companies that benefit from favorable state and federal
have long-standing regulations. The merger of Bell Atlantic and NYNEX
utility relationships created a very large company whose combined
with their customers and territory covers a substantial portion of our
pricing flexibility for current markets. Other combinations are occurring
local telephone in the industry, which may have a material adverse
services. effect on us.
We think that local telephone companies will gain
increased pricing flexibility from regulators as
competition increases. Our operating results and
cash flow could be materially and adversely
affected by actions by regulators, including
permitting the incumbent local telephone companies
in our markets to do the following:
. lower their rates substantially;
. engage in aggressive volume and term discount
pricing practices for their customers; or
. charge excessive fees to us for
interconnection to the incumbent local
telephone company's networks.
7
<PAGE>
If the regional Bell
telephone companies The regional Bell operating companies can now
could get regulatory obtain regulatory approval to offer long distance
approval to offer long services if they comply with the interconnection
distance service in requirements of the federal Telecommunications Act
competition with our of 1996. To date, the FCC has denied the requests
significant customers, for approval filed by regional Bell operating
some of our major companies in our operating areas. However, an
customers could lose approval of such a request could result in
market share. decreased market share for the major long distance
carriers which are among our significant customers.
This could have a material adverse effect on us.
The regional Bell Some of the regional Bell operating companies have
telephone companies also recently filed petitions with the FCC
continue to seek other requesting waivers of other obligations under the
regulatory approvals federal Telecommunications Act of 1996. These
that could significantly involve services we also provide such as high speed
enhance their data, long distance, and services to Internet
competitive position Service Providers. If the FCC grants the regional
against us. Bell operating companies' petitions, this could
have a material adverse effect on us.
Potential competitors Our potential competitors include other competitive
to our local exchange carriers, incumbent local telephone
telecommunications companies which are not subject to regional Bell
services include the operating companies' restrictions on offering long
regional Bell telephone distance service, AT&T, MCIWorldCom, Sprint and
companies, AT&T, other long distance carriers, cable television
MCIWorldCom and Sprint, companies, electric utilities, microwave carriers,
electric utilities and wireless telecommunications providers and private
other companies that networks built by large end users. Both AT&T and
have advantages over us. MCIWorldCom have announced that they have begun to
offer local telephone services in some areas of the
country, and AT&T recently announced a new wireless
technology for providing local telephone service.
AT&T and Tele-Communications, Inc. also recently
merged and MCIWorldCom and Sprint announced that
they will merge. Although we have good
relationships with the long distance carriers, they
could build their own facilities, purchase other
carriers or their facilities, or resell the
services of other carriers rather than use our
services when entering the market for local
exchange services.
Many of our current and potential competitors,
particularly incumbent local telephone companies,
have financial, personnel and other resources
substantially greater than our resources, as well
as other competitive advantages over us.
We Are Subject To
Extensive Regulation The federal Telecommunications Act of 1996
substantially changed federal, state and local laws
The federal and regulations governing telecommunications
Telecommunications Act businesses. This law could materially affect the
of 1996 may have a growth and operation of the telephone industry and
significant impact on the services we provide. There are numerous
our businesses. rulemakings that have been and continue to be
undertaken by the FCC which will interpret and
implement the provisions of this law. Furthermore,
portions of this law have been, and likely other
portions will be, challenged in the courts. In
addition, the federal Telecommunications Act of
1996 removes entry barriers for all companies and
could increase substantially the number of
competitors offering comparable services in our
markets or potential markets. We cannot predict the
outcome of such rulemakings or lawsuits or the
short- and long-term effect, financial or
otherwise, of this law and FCC rulemakings on us.
Furthermore, we cannot guarantee that rules adopted
by the FCC or state regulators or other legislative
or judicial initiatives relating to the
telecommunications industry will not have a
material adverse effect on us.
8
<PAGE>
Although the federal Telecommunications Act of 1996
requires local telephone companies to interconnect
with and sell services to us, these interconnection
agreements may have short terms, requiring us to
renegotiate them repeatedly. Local telephone
companies may not provide timely or adequate
service to us which would impair our reputation
with customers who could easily change back to
using the local telephone company. In addition, the
prices we pay in these agreements may be subject to
significant increases if state public utility
commissions establish prices to pass on to
competitive local exchange carriers part of the
cost of providing universal service.
Our operating companies that provide intrastate
services are also generally subject among other
matters to certification and tariff filing
requirements by state regulators. Challenges to our
tariffs and certificates by third parties or by the
states could cause us to incur substantial legal
and administrative expense.
Risks Related To Local Local multipoint distribution service is a new
Multipoint Distribution service. Major telecommunications equipment
Service Strategy manufacturers are currently introducing products
for the local multipoint distribution service
frequency band. As a result, no wireless local loop
systems are currently operating under local
multipoint distribution service, and implementation
of such systems could be subject to unforeseen
delays, costs and possible quality and
implementation issues. Material aspects of our
local multipoint distribution service
implementation strategy are still being developed
and defined, and there can be no guarantee that we
will develop and implement a successful and
profitable local multipoint distribution service
strategy, or that implementation of our local
multipoint distribution service strategy will not
involve substantial cost.
Rapid Technological The telecommunications industry is subject to rapid
Change and significant changes in technology. While we
believe that for the foreseeable future these
changes will neither materially affect the
continued use of fiber optic telecommunications
networks nor materially hinder our ability to
acquire necessary technologies, the effect of
technological changes on our business cannot be
predicted. Thus, there can be no guarantee that
technological developments will not have a material
adverse effect on us.
Year 2000 Issues Present The year 2000 issue refers to the inability of
Risks To Our Business computerized systems and technologies to recognize
Operations In Several and process dates beyond December 31, 1999. This
Ways could present risks to the operation of our
business in several ways. Our computerized business
applications that could be adversely affected by
the year 2000 issue include:
. information processing and financial
reporting systems,
. customer billing systems,
. customer service systems,
. telecommunication transmission and reception
systems, and
. facility systems.
9
<PAGE>
System failure or miscalculation could result in an
inability to process transactions, send invoices,
accept customer orders or provide customers with
products and services. Although we are evaluating
the impact of the year 2000 issue on our business
and are seeking to implement necessary solutions,
this process has not been completed.
There can be no assurance that the systems of other
companies on which our systems rely will be year
2000 ready or timely converted into systems
compatible with our systems. Our failure or a
third-party's failure to become year 2000 ready, or
our inability to become compatible with third
parties with which we have a material relationship,
may have a material adverse effect on us, including
significant service interruption or outages;
however, we cannot currently estimate the extent of
any such adverse effects.
Dependence Upon Network Our success in marketing our services to business
Infrastructure, Risk Of and government users requires that we provide
System Failure Or superior reliability, capacity and security through
Security Breach our network infrastructure. Our networks are
subject to physical damage, power loss, capacity
limitations, software defects, breaches of security
(by computer virus, break-ins or otherwise) and
other factors, any of which may cause interruptions
in service or reduced capacity for our customers.
Interruptions in service, capacity limitations or
security breaches could have a material adverse
effect on us.
Dependence On Key Our growth strategy depends in large part on our
Personnel ability to attract and retain key management,
marketing and operations personnel. Currently, our
business is managed by a small number of management
and operating personnel with certain other
services, including financial and certain
accounting services, provided by Adelphia. There
can be no assurance that we will attract and retain
the qualified personnel needed to manage, operate
and further develop our business. In addition, the
loss of the services of any one or more members of
our senior management team could have a material
adverse effect on Adelphia Business Solutions.
Dependence On Business For the nine months ended December 31, 1998 and the
From Interexchange six months ended June 30, 1999, approximately 18%
Carriers and 13%, respectively, of the operating companies'
combined revenues were attributable to access
services provided to MCIWorldCom and AT&T. The loss
of access revenues from interexchange carriers in
general or the loss of MCIWorldCom or AT&T as a
customer could have a material adverse effect on
our current revenue stream.
In addition, the federal Telecommunications Act of
1996 establishes procedures under which the
regional Bell operating companies can obtain
authority to compete with the interexchange
carriers in the long distance market, which could
result in a decreased market share for
interexchange carriers. Due to our operating
companies' dependence on business from
interexchange carriers, any significant loss of
market share by the interexchange carriers could
have a material adverse effect on us.
10
<PAGE>
We May Not Have The
Resources To Make Our current public debt indentures contain
Required Repurchases of provisions requiring Adelphia Business Solutions,
Our Debt If A Change of upon a change of control, to offer to redeem the
Control Occurs notes issued under those indentures. In the event a
change of control occurs, there is no assurance
that Adelphia Business Solutions will have the
ability to make an offer to redeem these notes,
that it will have sufficient funds to repurchase
all of these notes or that it would be able to
obtain any additional debt or equity financing in
an amount sufficient to repurchase these notes or
notes which may be offered by this prospectus and a
related prospectus supplement.
Unequal Voting Rights Of Adelphia Business Solutions has two classes of
Stockholders common stock--Class A which carries one vote per
share and Class B which carries ten votes per
share. The holders of Class B common stock can
control the outcome of matters being voted upon by
the stockholders such as the election of directors.
It Is Unlikely You Will Adelphia Business Solutions has never declared or
Receive A Return On Your paid cash dividends on any of its common stock and
Shares Through The has no intention of doing so in the forseeable
Payment Of Cash future. As a result, it is unlikely that you will
Dividends receive a return on your shares through the payment
of cash dividends.
Purchasers Of Our Common Persons purchasing common stock will incur
Stock Will Incur immediate and substantial net tangible book value
Immediate Dilution dilution.
Future Sales Of Sales of a substantial number of shares of Class A
Outstanding Common Stock common stock or Class B common stock could
Could Adversely Affect adversely affect the market price of our Class A
The Market Price Of Our common stock and could impair our ability in the
Common Stock future to raise capital through stock offerings. If
all of our existing holders of our warrants and our
Class B common stock exercised their existing
rights as of June 30, 1999 to receive Class A
common stock, we would issue approximately an
additional 33.1 million shares of Class A common
stock.
Forward-Looking The statements contained or incorporated by
Statements In This reference in this prospectus that are not
Prospectus Are Subject historical facts are "forward-looking statements"
To Risks and and can be identified by the use of forward-looking
Uncertainties terminology such as "believes," "expects," "may,"
"will," "should," "intends" or "anticipates" or the
negative thereof or other variations thereon or
comparable terminology, or by discussions of
strategy that involve risks and uncertainties.
Certain information included or incorporated by
reference in this prospectus, is forward-looking,
such as information relating to the effects of
future regulation, future capital commitments and
the effects of competition. These statements appear
in a number of places in this prospectus and our
most recent Form 10-K and Form 10-Q, including
"Summary," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and
"Business," and include statements regarding the
intent, belief and current expectations of
11
<PAGE>
Adelphia Business Solutions and its directors and
officers. Such forward-looking information involves
important risks and uncertainties that could
significantly affect expected results in the future
from those expressed in any forward-looking
statements made by, or on behalf of, Adelphia
Business Solutions. These risks and uncertainties
include, but are not limited to, uncertainties
relating to Adelphia Business Solutions' ability to
successfully market its services to current and new
customers, access markets on a nondiscriminatory
basis, identify, design and construct fiber optic
networks, install cable and facilities (including
switching electronics), and obtain rights-of-way,
building access rights and any required
governmental authorizations, franchises and
permits, all in a timely manner, at reasonable
costs and on satisfactory terms and conditions, as
well as risks and uncertainties relating to general
economic conditions, the cost and availability of
capital, acquisitions and divestitures, government
and regulatory policies, the pricing and
availability of equipment, materials, and
inventories, technological developments, year 2000
issues and changes in the competitive environment
in which Adelphia Business Solutions operates.
Persons reading this prospectus are cautioned that
such statements are only predictions and that
actual events or results may differ materially. In
evaluating such statements, readers should
specifically consider the various factors which
could cause actual events or results to differ
materially from those indicated by such forward-
looking statements.
12
<PAGE>
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to combined fixed
charges and preferred stock dividends of Adelphia Business Solutions for the
periods indicated. For purposes of calculating the ratio of earnings available
to cover combined fixed charges and preferred stock dividends:
. earnings consist of loss before income taxes and extraordinary items
plus fixed charges, excluding capitalized interest, and
. fixed charges consist of interest, whether expensed or capitalized, plus
amortization of debt issuance costs plus the assumed interest component
of rent expense.
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------Nine Months Ended Six Months Ended
March 31, 1995 March 31, 1996 March 31, 1997 March 31, 1998 December 31, 1998 June 30, 1999
-------------- -------------- -------------- -------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
-- -- -- -- -- --
</TABLE>
For the years ended March 31, 1995, 1996, 1997, and 1998, the nine months
ended December 31, 1998, and the six months ended June 30, 1999, Adelphia
Business Solutions' earnings were insufficient to cover its combined fixed
charges and preferred stock dividends by approximately $7,700,000, $13,800,000
$30,300,000 $85,800,000, $105,500,000 and $90,000,000, respectively. Pro forma
for the issuance of the 12% senior subordinated notes due 2007, Adelphia
Business Solutions' earnings were insufficient to cover its combined fixed
charges and preferred stock dividends by approximately $132,500,000 and
approximately $96,000,000 for the nine months ended December 31, 1998 and the
six months ended June 30, 1999, respectively.
DILUTION
The net tangible book value of Adelphia Business Solutions' common stock as
of June 30, 1999 was a deficit of approximately $30,300,000 or a negative $0.55
a share. Net tangible book value per share represents the amount of Adelphia
Business Solutions' common stock and other stockholders' equity deficiency,
less intangible assets, divided by shares of Adelphia Business Solutions'
common stock outstanding. Purchasers of common stock will have an immediate
dilution of net tangible book value. Net tangible book value dilution per share
represents the difference between the amount per share paid by purchasers of
shares of Class A or Class B common stock in an offering by Adelphia Business
Solutions and the pro forma net tangible book value per share of the common
stock immediately after completion of such offering.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement, we
intend to apply the net proceeds from the sale of the securities to which this
prospectus relates to general funds to be used for general corporate purposes
including capital expenditures, acquisitions, the reduction of indebtedness,
investments and other purposes. We may invest funds not required immediately
for such purposes in short-term obligations or we may use them to reduce the
future level of our indebtedness.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth general terms and provisions of the
debt securities to which any prospectus supplement may relate. We will describe
the particular terms and provisions of the series of debt securities offered by
a prospectus supplement, and the extent to which such general terms and
provisions described below may apply thereto, in the prospectus supplement
relating to such series of debt securities.
The debt securities are to be issued in one or more series under an
indenture, as supplemented or amended from time to time between Adelphia
Business Solutions and an institution that we will name in the related
prospectus supplement, as trustee. For ease of reference, we will refer to the
indenture relating to senior debt
13
<PAGE>
securities as the senior indenture and we will refer to the trustee under that
indenture as the senior trustee. The subordinated debt securities are to be
issued in one or more series under an indenture, as supplemented or amended
from time to time, between Adelphia Business Solutions and an institution that
we will name in the related prospectus supplement, as trustee. For ease of
reference, we will refer to the indenture relating to subordinate debt
securities as the subordinate indenture and we will refer to the trustee under
that indenture as the subordinate trustee. This summary of certain terms and
provisions of the debt securities and the indentures is not necessarily
complete, and we refer you to the copy of the form of the indentures which are
filed as an exhibit to the registration statement of which this prospectus
forms a part, and to the Trust Indenture Act. Whenever we refer to particular
defined terms of the indentures in this Section or in a prospectus supplement,
we are incorporating these definitions into this prospectus or the prospectus
supplement.
General
The debt securities will be issuable in one or more series pursuant to an
indenture supplemental to the applicable indenture or a resolution of Adelphia
Business Solutions' board of directors or a committee of the board. Unless
otherwise specified in a prospectus supplement, each series of senior debt
securities will rank pari passu in right of payment with all of Adelphia
Business Solutions' other senior unsecured obligations. Each series of
subordinated debt securities will be subordinated and junior in right of
payment to the extent and in the manner set forth in the subordinated indenture
and the supplemental indenture relating to that debt. Except as otherwise
provided in a prospectus supplement, the indentures do not limit the incurrence
or issuance of other secured or unsecured debt of Adelphia Business Solutions,
whether under the indentures, any other indenture that Adelphia Business
Solutions may enter into in the future or otherwise. For more information, you
should read the prospectus supplement relating to a particular offering of
securities.
The applicable prospectus supplement or prospectus supplements will describe
the following terms of each series of debt securities:
. the title of the debt securities and whether such series constitutes
senior debt securities or subordinated debt securities;
. any limit upon the aggregate principal amount of the debt securities;
. the date or dates on which the principal of the debt securities is
payable or the method of that determination or the right, if any, of
Adelphia Business Solutions to defer payment of principal;
. the rate or rates, if any, at which the debt securities will bear
interest (including reset rates, if any, and the method by which any
such rate will be determined), the interest payment dates on which
interest will be payable and the right, if any, of Adelphia Business
Solutions to defer any interest payment;
. the place or places where, subject to the terms of the indenture as
described below under the caption "--Payment and Paying Agents," the
principal of and premium, if any, and interest, if any, on the debt
securities will be payable and where, subject to the terms of the
indenture as described below under the caption "--Denominations,
Registration and Transfer," Adelphia Business Solutions will maintain an
office or agency where debt securities may be presented for registration
of transfer or exchange and the place or places where notices and
demands to or upon Adelphia Business Solutions in respect of the debt
securities and the indenture may be made;
. any period or periods within, or date or dates on which, the price or
prices at which and the terms and conditions upon which debt securities
may be redeemed, in whole or in part, at the option of Adelphia Business
Solutions pursuant to any sinking fund or otherwise;
. the obligation, if any, of Adelphia Business Solutions to redeem or
purchase the debt securities pursuant to any sinking fund or analogous
provisions or at the option of a holder and the period or periods within
which, the price or prices at which, the currency or currencies
including currency unit or units, in which and the other terms and
conditions upon which the debt securities will be redeemed or purchased,
in whole or in part, pursuant to such obligation;
14
<PAGE>
. the denominations in which any debt securities will be issuable if other
than denominations of $1,000 and any integral multiple thereof;
. if other than in U.S. Dollars, the currency or currencies, including
currency unit or units, in which the principal of, and premium, if any,
and interest, if any, on the debt securities will be payable, or in
which the debt securities shall be denominated;
. any additions, modifications or deletions in the events of default or
covenants of Adelphia Business Solutions specified in the indenture with
respect to the debt securities;
. if other than the principal amount, the portion of the principal amount
of debt securities that will be payable upon declaration of acceleration
of the maturity thereof;
. any additions or changes to the indenture with respect to a series of
debt securities that will be necessary to permit or facilitate the
issuance of the series in bearer form, registrable or not registrable as
to principal, and with or without interest coupons;
. any index or indices used to determine the amount of payments of
principal of and premium, if any, on the debt securities and the manner
in which such amounts will be determined;
. subject to the terms described under "--Global Debt Securities," whether
the debt securities of the series will be issued in whole or in part in
the form of one or more global securities and, in such case, the
depositary for the global securities;
. the appointment of any trustee, registrar, paying agent or agents;
. the terms and conditions of any obligation or right of Adelphia Business
Solutions or a holder to convert or exchange debt securities into
preferred securities or other securities;
. whether the defeasance and covenant defeasance provisions described
under the caption "--Satisfaction and Discharge; Defeasance" will be
inapplicable or modified;
. any applicable subordination provisions in addition to those set forth
herein with respect to subordinated debt securities; and
. any other terms of the debt securities not inconsistent with the
provisions of the applicable indenture.
We may sell debt securities at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time
of issuance is below market rates. We will describe material U.S. federal
income tax consequences and special considerations applicable to the debt
securities in the applicable prospectus supplement.
If the purchase price of any of the debt securities is payable in one or
more foreign currencies or currency units or if any debt securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any debt securities is
payable in one or more foreign currencies or currency units, we will set forth
the restrictions, elections, material U.S. federal income tax considerations,
specific terms and other information with respect to such issue of debt
securities and such foreign currency or currency units in the applicable
prospectus supplement.
If any index is used to determine the amount of payments of principal,
premium, if any, or interest on any series of debt securities, we will describe
the material U.S. federal income tax, accounting and other considerations
applicable thereto in the applicable prospectus supplement.
Denominations, Registration and Transfer
Unless otherwise specified in the applicable prospectus supplement, the debt
securities will be issuable only in registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. Debt
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securities of any series will be exchangeable for other debt securities of the
same issue and series, of any authorized denominations of a like aggregate
principal amount, the same original issue date, stated maturity and bearing the
same interest rate.
Holders may present each series of debt securities for exchange as provided
above, and for registration of transfer, with the form of transfer endorsed
thereon, or with a satisfactory written instrument of transfer, duly executed,
at the office of the appropriate securities registrar or at the office of any
transfer agent designated by Adelphia Business Solutions for such purpose and
referred to in the applicable prospectus supplement, without service charge and
upon payment of any taxes and other governmental charges as described in the
indenture. Adelphia Business Solutions will appoint the trustee of each series
of debt securities as securities registrar for such series under the indenture.
If the applicable prospectus supplement refers to any transfer agents, in
addition to the securities registrar initially designated by Adelphia Business
Solutions with respect to any series, Adelphia Business Solutions may at any
time rescind the designation of any such transfer agent or approve a change in
the location through which any such transfer agent acts, provided that Adelphia
Business Solutions maintains a transfer agent in each place of payment for the
series. Adelphia Business Solutions may at any time designate additional
transfer agents with respect to any series of debt securities.
In the event of any redemption, neither Adelphia Business Solutions nor the
trustee will be required to:
. issue, register the transfer of or exchange debt securities of any
series during a period beginning at the opening of business 15 days
before the day of mailing of a notice for redemption of debt securities
of that series, and ending at the close of business on the day of
mailing of the relevant notice of redemption, or
. transfer or exchange any debt securities so selected for redemption,
except, in the case of any debt securities being redeemed in part, any
portion not being redeemed.
Global Debt Securities
Unless otherwise specified in the applicable prospectus supplement, the debt
securities of a series may be issued in whole or in part in the form of one or
more global securities that we will deposit with, or on behalf of, a depositary
identified in the prospectus supplement relating to such series. Global debt
securities may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual debt securities represented by it, a global debt security may not be
transferred except as a whole by the depositary for the global debt security to
a nominee of the depositary or by a nominee of the depositary to the depositary
or another nominee of the depositary or by the depositary or any nominee to a
successor depositary or any nominee of the successor.
The specific terms of the depositary arrangement with respect to a series of
debt securities will be described in the prospectus supplement relating to the
series. Adelphia Business Solutions anticipates that the following provisions
will generally apply to depositary arrangements.
Upon the issuance of a global debt security, and the deposit of the global
debt security with or on behalf of the applicable depositary, the depositary
for the global debt security or its nominee will credit on its book-entry
registration and transfer system, the respective principal amounts of the
individual debt securities represented by the global debt security to the
accounts of persons, more commonly known as participants, that have accounts
with the depositary. These accounts will be designated by the dealers,
underwriters or agents with respect to the debt securities or by Adelphia
Business Solutions if the debt securities are offered and sold directly by
Adelphia Business Solutions. Ownership of beneficial interests in a global debt
security will be limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests in the global debt
security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the applicable depositary or its nominee
with respect to interests of participants and the records of participants with
respect to interests of persons who hold through participants. The laws of some
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states require that certain purchasers of securities take physical delivery of
the securities in definitive form. These limits and laws may impair the ability
to transfer beneficial interests in a global debt security.
So long as the depositary for a global debt security, or its nominee, is the
registered owner of the global debt security, the depositary or its nominee, as
the case may be, will be considered the sole owner or holder of the debt
securities represented by the global debt security for all purposes under the
indenture. Except as provided below, owners of beneficial interests in a global
debt security will not be entitled to have any of the individual debt
securities of the series represented by the global debt security registered in
their names, will not receive or be entitled to receive physical delivery of
any debt securities of the series in definitive form and will not be considered
the owners or holders of them under the indenture.
Payments of principal of, and premium, if any, and interest on individual
debt securities represented by a global debt security registered in the name of
a depositary or its nominee will be made to the depositary or its nominee, as
the case may be, as the registered owner of the global debt security
representing the debt securities. None of Adelphia Business Solutions, or the
trustee, any paying agent, or the securities registrar for the debt securities
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interest of the
global debt security for the debt securities or for maintaining, supervising or
reviewing any records relating to those beneficial ownership interests.
Adelphia Business Solutions expects that the depositary for a series of debt
securities or its nominee, upon receipt of any payment of principal, premium or
interest in respect of a permanent global debt security representing any of the
debt securities, immediately will credit participants' accounts with payments
in amounts proportionate to their respective beneficial interest in the
principal amount of the global debt security for the debt securities as shown
on the records of the depositary or its nominee. Adelphia Business Solutions
also expects that payments by participants to owners of beneficial interests in
the global debt security held through the participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name." These payments will be the responsibility of these participants.
Unless otherwise specified in the applicable prospectus supplement, if the
depositary for a series of debt securities is at any time unwilling, unable or
ineligible to continue as depositary and a successor depositary is not
appointed by Adelphia Business Solutions within 90 days, Adelphia Business
Solutions will issue individual debt securities of the series in exchange for
the global debt security representing the series of debt securities. In
addition, unless otherwise specified in the applicable prospectus supplement,
Adelphia Business Solutions may at any time and in its sole discretion, subject
to any limitations described in the prospectus supplement relating to the debt
securities, determine not to have any debt securities of the series represented
by one or more global debt securities and, in such event, will issue individual
debt securities of the series in exchange for such global debt securities.
Further, if Adelphia Business Solutions so specifies with respect to the debt
securities of a series, an owner of a beneficial interest in a global debt
security representing debt securities of the series may, on terms acceptable to
Adelphia Business Solutions, the trustee and the depositary for the global debt
security, receive individual debt securities of the series in exchange for such
beneficial interests, subject to any limitations described in the prospectus
supplement relating to the debt securities. In any such instance, an owner of a
beneficial interest in a global debt security will be entitled to physical
delivery of individual debt securities of the series represented by the global
debt security equal in principal amount to its beneficial interest and to have
the debt securities registered in its name. Individual debt securities of the
series so issued will be issued in denominations, unless otherwise specified by
Adelphia Business Solutions, of $1,000 and integral multiples thereof. The
applicable prospectus supplement may specify other circumstances under which
individual debt securities may be issued in exchange for the global debt
security representing any debt securities.
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Payment and Paying Agents
Unless otherwise indicated in the applicable prospectus supplement, payment
of principal of, and premium, if any, and any interest on debt securities will
be made at the office of the trustee in New York or at the office of such
paying agent or paying agents as Adelphia Business Solutions may designate from
time to time in the applicable prospectus supplement, except that at the option
of Adelphia Business Solutions payment of any interest may be made:
. except in the case of global debt securities, by check mailed to the
address of the person or entity entitled thereto as such address shall
appear in the securities register; or
. by transfer to an account maintained by the person or entity entitled
thereto as specified in the securities register, provided that proper
transfer instructions have been received by the regular record date.
Unless otherwise indicated in the applicable prospectus supplement, we
will make payment of any interest on debt securities to the person or
entity in whose name the debt security is registered at the close of
business on the regular record date for the interest payment, except in
the case of defaulted interest. Adelphia Business Solutions may at any
time designate additional paying agents or rescind the designation of
any paying agent; however, Adelphia Business Solutions will at all times
be required to maintain a paying agent in each place of payment for each
series of debt securities.
Any moneys deposited with the trustee or any paying agent, or held by
Adelphia Business Solutions in trust, for the payment of the principal of, and
premium, if any, or interest on any debt security and remaining unclaimed for
two years after such principal, and premium, if any, or interest has become due
and payable will, at the request of Adelphia Business Solutions, be repaid to
Adelphia Business Solutions or released from such trust, as applicable, and the
holder of the debt security will thereafter look, as a general unsecured
creditor, only to Adelphia Business Solutions for payment.
Option to Defer Interest Payments or to Pay-in-Kind
If provided in the applicable prospectus supplement, Adelphia Business
Solutions will have the right, at any time and from time to time during the
term of any series of debt securities, to defer the payment of interest for
such number of consecutive interest payment periods as may be specified in the
applicable prospectus supplement, subject to the terms, conditions and
covenants, if any, specified in such prospectus supplement, provided that an
extension period may not extend beyond the stated maturity of the final
installment of principal of the series of debt securities. If provided in the
applicable prospectus supplement, Adelphia Business Solutions will have the
right, at any time and from time to time during the term of any series of debt
securities, to make payments of interest by delivering additional debt
securities of the same series. Certain material U.S. federal income tax
consequences and special considerations applicable to the debt securities will
be described in the applicable prospectus supplement.
Subordination
Except as set forth in the applicable prospectus supplement, the
subordinated indenture provides that the subordinated debt securities are
subordinated and junior in right of payment to all senior indebtedness of
Adelphia Business Solutions. If:
. Adelphia Business Solutions defaults in the payment of any principal, or
premium, if any, or interest on any senior indebtedness when the same
becomes due and payable, whether at maturity or at a date fixed for
prepayment or declaration or otherwise; or
. an event of default occurs with respect to any senior indebtedness
permitting the holders thereof to accelerate the maturity thereof and
written notice of such event of default, requesting that payments on
subordinated debt securities cease, is given to Adelphia Business
Solutions by the holders of senior indebtedness then unless and until
the default in payment or event of default shall have been
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cured or waived or shall have ceased to exist, no direct or indirect
payment, in cash, property or securities, by set-off or otherwise, will
be made or agreed to be made on account of the subordinated debt
securities or interest thereon or in respect of any repayment,
redemption, retirement, purchase or other acquisition of subordinated
debt securities.
Except as set forth in the applicable prospectus supplement, the
subordinated indenture provides that in the event of:
. any insolvency, bankruptcy, receivership, liquidation, reorganization,
readjustment, composition or other similar proceeding relating to
Adelphia Business Solutions, its creditors or its property;
. any proceeding for the liquidation, dissolution or other winding-up of
Adelphia Business Solutions, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings;
. any assignment by Adelphia Business Solutions for the benefit of
creditors; or
. any other marshaling of the assets of Adelphia Business Solutions;
all present and future senior indebtedness, including, without limitation,
interest accruing after the commencement of the proceeding, assignment or
marshaling of assets, will first be paid in full before any payment or
distribution, whether in cash, securities or other property, will be made by
Adelphia Business Solutions on account of subordinated debt securities. In that
event, any payment or distribution, whether in cash, securities or other
property, other than securities of Adelphia Business Solutions or any other
corporation provided for by a plan of reorganization or a readjustment, the
payment of which is subordinate, at least to the extent provided in the
subordination provisions of the indenture, to the payment of all senior
indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment and other than
payments made from any trust described in the "Satisfaction and Discharge;
Defeasance" below, which would otherwise but for the subordination provisions
be payable or deliverable in respect of subordinated debt securities, including
any such payment or distribution which may be payable or deliverable by reason
of the payment of any other indebtedness of Adelphia Business Solutions being
subordinated to the payment of subordinated debt securities will be paid or
delivered directly to the holders of senior indebtedness, or to their
representative or trustee, in accordance with the priorities then existing
among such holders until all senior indebtedness shall have been paid in full.
No present or future holder of any senior indebtedness will be prejudiced in
the right to enforce subordination of the indebtedness evidenced by
subordinated debt securities by any act or failure to act on the part of
Adelphia Business Solutions.
Except as provided in the applicable prospectus supplement, the term "senior
indebtedness" is defined as the principal, premium, if any, and interest on:
. all indebtedness of Adelphia Business Solutions, whether outstanding on
the date of the issuance of subordinated debt securities or thereafter
created, incurred or assumed, which is for money borrowed, or which is
evidenced by a note or similar instrument given in connection with the
acquisition of any business, properties or assets, including securities;
. any indebtedness of others of the kinds described in the first bullet
point above for the payment of which Adelphia Business Solutions is
responsible or liable as guarantor or otherwise; and
. amendments, renewals, extensions and refundings of any such
indebtedness;
unless in any instrument or instruments evidencing or securing such
indebtedness or pursuant to which the same is outstanding, or in any such
amendment, renewal, extension or refunding, it is expressly provided that such
indebtedness is not superior in right of payment to subordinated debt
securities. The senior indebtedness will continue to be senior indebtedness and
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of the senior indebtedness or
extension or renewal of the senior indebtedness.
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Except as provided in the applicable prospectus supplement, the subordinated
indenture for a series of subordinated debt does not limit the aggregate amount
of senior indebtedness that may be issued by Adelphia Business Solutions. As of
June 30, 1999, senior indebtedness of Adelphia Business Solutions aggregated
approximately $486,700,000. In addition, because Adelphia Business Solutions is
a holding company, the subordinated debt securities are effectively
subordinated to all existing and future liabilities of Adelphia Business
Solutions' subsidiaries.
Modification of Indentures
From time to time, Adelphia Business Solutions and the trustees may modify
the indentures without the consent of any holders of any series of debt
securities with respect to some matters, including:
. to cure any ambiguity, defect or inconsistency or to correct or
supplement any provision which may be inconsistent with any other
provision of the indenture;
. to qualify, or maintain the qualification of, the indentures under the
Trust Indenture Act; and
. to make any change that does not materially adversely affect the
interests of any holder of such series of debt securities.
In addition, under the indentures, Adelphia Business Solutions and the
trustee may modify some rights, covenants and obligations of Adelphia Business
Solutions and the rights of holders of any series of debt securities with the
written consent of the holders of at least a majority in aggregate principal
amount of the series of outstanding debt securities; but no extension of the
maturity of any series of debt securities, reduction in the interest rate or
extension of the time for payment of interest, change in the optional
redemption or repurchase provisions in a manner adverse to any holder of the
series of debt securities, other modification in the terms of payment of the
principal of, or interest on, the series of debt securities, or reduction of
the percentage required for modification, will be effective against any holder
of the series of outstanding debt securities without the holder's consent.
In addition, Adelphia Business Solutions and the trustees may execute,
without the consent of any holder of the debt securities, any supplemental
indenture for the purpose of creating any new series of debt securities.
Events of Default
The indentures provide that any one or more of the following described
events with respect to a series of debt securities that has occurred and is
continuing constitutes an "event of default" with respect to that series of
debt securities:
. failure for 60 days to pay any interest or any sinking fund payment on
the series of debt securities when due, (subject to the deferral of any
due date in the case of an extension period);
. failure to pay any principal or premium, if any, on the series of the
debt securities when due whether at maturity, upon redemption, by
declaration or otherwise;
. failure to observe or perform in any material respect certain other
covenants contained in the indenture for 90 days after written notice
has been given to Adelphia Business Solutions from the trustee or the
holders of at least 25% in principal amount of the series of outstanding
debt securities;
. default resulting in acceleration of other indebtedness of Adelphia
Business Solutions for borrowed money where the aggregate principal
amount so accelerated exceeds $25 million and the acceleration is not
rescinded or annulled within 30 days after the written notice thereof to
Adelphia Business Solutions by the trustee or to Adelphia Business
Solutions and the trustee by the holders of 25% in aggregate principal
amount of the debt securities of the series then outstanding, provided
that the event of default will be remedied, cured or waived if the
default that resulted in the acceleration of such other indebtedness is
remedied, cured or waived; or
. certain events in bankruptcy, insolvency or reorganization of Adelphia
Business Solutions.
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The holders of a majority in outstanding principal amount of the series of
debt securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee of the
series. The trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the series may declare the principal due and
payable immediately upon an event of default. The holders of a majority in
aggregate outstanding principal amount of the series may annul the declaration
and waive the default if the default (other than the non-payment of the
principal of the series which has become due solely by the acceleration) has
been cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
trustee of the series.
The holders of a majority in outstanding principal amount of a series of
debt securities affected thereby may, on behalf of the holders of all the
holders of the series of debt securities, waive any past default, except a
default in the payment of principal or interest, unless the default has been
cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
trustee of the series, or a default in respect of a covenant or provision which
under the related indenture cannot be modified or amended without the consent
of the holder of each outstanding debt security of the series. Adelphia
Business Solutions is required to file annually with the trustees a certificate
as to whether or not Adelphia Business Solutions is in compliance with all the
conditions and covenants applicable to it under the indentures.
In case an event of default shall occur and be continuing as to a series of
debt securities, the trustee of the series will have the right to declare the
principal of and the interest on the debt securities, and any other amounts
payable under the indenture, to be forthwith due and payable and to enforce its
other rights as a creditor with respect to the debt securities.
No holder of any debt securities will have any right to institute any
proceeding with respect to the indenture or for any remedy thereunder, unless
the holder shall have previously given to the trustee written notice of a
continuing event of default and unless also the holders of at least 25% in
aggregate principal amount of the outstanding debt securities of the series
shall have made written request and offered reasonably indemnity to the trustee
of the series to institute the proceeding as a trustee, and unless the trustee
shall not have received from the holders of a majority in aggregate principal
amount of the outstanding debt securities of the class a direction inconsistent
with the request and shall have failed to institute the proceeding within 60
days. However, these limitations do not apply to a suit instituted by a holder
of a debt security for enforcement of payment of the principal or interest on
the debt security on or after the respective due dates expressed in the debt
security.
Consolidation, Merger, Sale of Assets and Other Transactions
Unless otherwise indicated in the applicable prospectus supplement, the
indentures provide that Adelphia Business Solutions will not consolidate with
or merge into any other person or entity or sell, assign, convey, transfer or
lease its properties and assets substantially as an entirety to any person or
entity unless:
. either Adelphia Business Solutions is the continuing corporation, or any
successor or purchaser is a corporation, partnership, or trust or other
entity organized under the laws of the United States of America, any
State thereof or the District of Columbia, and the successor or
purchaser expressly assumes Adelphia Business Solutions' obligations on
the debt securities under a supplemental indenture; and
. immediately before and after giving effect thereto, no event of default,
and no event which, after notice or lapse of time or both, would become
an event of default, shall have happened and be continuing.
Unless otherwise indicated in the applicable prospectus supplement, the
general provisions of the indentures do not afford holders of the debt
securities protection in the event of a highly leveraged or other transaction
involving Adelphia Business Solutions that may adversely affect holders of the
debt securities.
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Satisfaction and Discharge; Defeasance
The indentures provide that when, among other things, all debt securities
not previously delivered to the trustee for cancellation:
. have become due and payable, or
. will become due and payable at their stated maturity within one year,
and Adelphia Business Solutions deposits or causes to be deposited with the
trustee, as trust funds in trust for the purpose, an amount in the currency or
currencies in which the debt securities are payable sufficient to pay and
discharge the entire indebtedness on the debt securities not previously
delivered to the trustee for cancellation, for the principal, and premium, if
any, and interest to the date of the deposit or to the stated maturity, as the
case may be, then the indenture will cease to be of further effect (except as
to Adelphia Business Solutions' obligations to pay all other sums due pursuant
to the indenture and to provide the officers' certificates and opinions of
counsel described therein), and Adelphia Business Solutions will be deemed to
have satisfied and discharged the indenture.
The indentures provide that Adelphia Business Solutions may elect either:
. to terminate, and be deemed to have satisfied, all its obligations with
respect to any series of debt securities, except for the obligations to
register the transfer or exchange of such debt securities, to replace
mutilated, destroyed, lost or stolen debt securities, to maintain an
office or agency in respect of the debt securities and to compensate and
indemnify the trustee ("defeasance"); or
. to be released from its obligations with respect to certain covenants,
("covenant defeasance") upon the deposit with the trustee, in trust for
such purpose, of money and/or U.S. Government Obligations, as defined in
the indenture, which through the payment of principal and interest in
accordance with the term used will provide money, in an amount
sufficient (in the opinion of a nationally recognized firm of
independent public accountants) to pay the principal of, interest on and
any other amounts payable in respect of the outstanding debt securities
of the series.
Such a trust may be established only if, among other things, Adelphia
Business Solutions has delivered to the trustee an opinion of counsel (as
specified in the indenture) with regard to certain matters, including an
opinion to the effect that the holders of the debt securities will not
recognize income, gain or loss for Federal income tax purposes as a result of
the deposit and discharge and will be subject to Federal income tax on the same
amounts and in the same manner and at the same times as would have been the
case if the deposit and defeasance or covenant defeasance, as the case may be,
had not occurred.
Redemption
Unless otherwise indicated in the applicable prospectus supplement, debt
securities will not be subject to any sinking fund requirements.
Unless otherwise indicated in the applicable prospectus supplement, Adelphia
Business Solutions may, at its option, redeem the debt securities of any series
in whole at any time or in part from time to time, at the redemption price set
forth in the applicable prospectus supplement plus accrued and unpaid interest
to the date fixed for redemption, and debt securities in denominations larger
than $1,000 may be redeemed in part but only in integral multiples of $1,000.
If the debt securities of any series are so redeemable only on or after a
specified date or upon the satisfaction of additional conditions, the
applicable prospectus supplement will specify the date or describe the
conditions.
Adelphia Business Solutions will mail notice of any redemption at least 30
days but not more than 60 days before the redemption date to each holder of
debt securities to be redeemed at the holder's registered address. Unless
Adelphia Business Solutions defaults in the payment of the redemption price, on
and after the redemption date interest shall cease to accrue on the debt
securities or portions thereof called for redemption.
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Conversion or Exchange
If and to the extent indicated in the applicable prospectus supplement, the
debt securities of any series may be convertible or exchangeable into other
securities. The specific terms on which debt securities of any series may be so
converted or exchanged will be set forth in the applicable prospectus
supplement. These terms may include provisions for conversion or exchange,
either mandatory, at the option of the holder, or at the option of Adelphia
Business Solutions, in which case the number of shares of other securities to
be received by the holders of debt securities would be calculated as of a time
and in the manner stated in the applicable prospectus supplement.
Certain Covenants
The indentures contain certain covenants regarding, among other matters,
corporate existence, payment of taxes and reports to holders of debt
securities. To the extent indicated in the applicable prospectus supplement,
these covenants may be removed or additional covenants added with respect to
any series of debt securities.
Governing Law
The indentures and the debt securities will be governed by and construed in
accordance with the laws of the State of New York.
Information Concerning the Trustees
Each trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to these provisions, each trustee is under no obligation
to exercise any of the powers vested in it by the indenture at the request of
any holder of the debt securities, unless offered reasonable indemnity by the
holder against the costs, expenses and liabilities which might be incurred
thereby. Each trustee is not required to expend or risk its own funds or
otherwise incur personal financial liability in the performance of its duties
if the trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
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DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock and warrants of Adelphia
Business Solutions and certain provisions of Adelphia Business Solutions'
Certificate of Incorporation and Bylaws is as of the date of this prospectus
and is a summary and is qualified in its entirety by Adelphia Business
Solutions' Certificate of Incorporation and Bylaws, each as amended, which
documents are filed as exhibits to the registration statement covering this
prospectus.
As of October 25, 1999, Adelphia Business Solutions' authorized capital
stock consists of 800,000,000 shares of Class A common stock, par value $.01
per share, 400,000,000 shares of Class B common stock, par value $.01 per
share, and 50,000,000 shares of preferred stock, par value $0.01 per share.
Common Stock
Shares of Class A common stock and Class B common stock are substantially
identical, except that holders of Class A common stock are entitled to one vote
per share and holders of Class B common stock are entitled to 10 votes per
share on all matters submitted to a vote of stockholders.
Class A common stock
The holders of Class A common stock are entitled to one vote per share on
all matters to be voted on by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of Class A common
stock and Class B common stock are entitled to receive dividends ratably, if
any such dividends are declared, from time to time by the Board of Directors
out of funds legally available therefor. Stock dividends declared on Class A
common stock shall be in shares of Class A common stock, and stock dividends on
Class B common stock shall be in shares of Class B common stock. In the event
of a liquidation, dissolution or winding up of Adelphia Business Solutions, the
holders of Class A common stock and Class B common stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
rights of the holders of the preferred stock then outstanding. There are no
redemption or sinking fund provisions available to the Class A common stock.
All outstanding shares of common stock are fully paid and non-assessable, and
the shares of Class A or Class B common stock to be issued upon exercise of the
Warrants will be fully paid and non-assessable.
Class B common stock
The holders of Class B common stock are entitled to ten votes per share on
all matters to be voted on by the stockholders. Each share of Class B common
stock is convertible at the option of the holder into one share of Class A
common stock. In all other respects, the provisions of the Class B common stock
are identical to those of the Class A common stock. There are no contractual
restrictions, or restrictions contained in the Certificate of Incorporation,
regarding the ability to transfer shares of Class B common stock.
Neither the holders of Class A common stock nor the holders of Class B
common stock have cumulative voting rights. For a discussion of the effects of
the voting rights of Adelphia, see "Risk Factors--Control by Adelphia
Communications Corporation."
Preferred Stock
The board of directors is authorized, subject to any limitations prescribed
by law, without further stockholder approval, to issue from time to time such
shares of preferred stock, in one or more classes or series. Each class or
series of preferred stock shall have such number of shares, designations,
preferences, voting powers, qualifications and special or relative rights or
privileges as shall be determined by the Board of Directors, which may include,
among others
. the distinctive designation of each series and the number of shares that
will constitute the series;
. the voting rights, if any, of shares of the series;
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. the dividend rate on the shares of the series, any restriction,
limitation or condition upon the payment of dividends, whether dividends
will be cumulative and the dates on which dividends are payable;
. the prices at which, and the terms and conditions on which, the shares
of the series may be redeemed, if the shares are redeemable;
. the purchase or sinking fund provisions, if any, for the purchase or
redemption of shares of the series;
. any preferential amount payable upon shares of the series in the event
of the liquidation, dissolution or winding up of Adelphia or the
distribution of its assets;
. the prices or rates of conversion at which, and the terms and conditions
on which, the shares of such series may be converted into other
securities, if such shares are convertible.
The ownership and control of Adelphia Business Solutions by the holders of
common stock would be diluted if Adelphia Business Solutions were to issue
preferred stock that had voting rights or that was convertible into common
stock. In addition, the holders of preferred stock issued by Adelphia Business
Solutions would be entitled by law to vote on certain transactions such as a
merger or consolidation, and thus the issuance of preferred stock could dilute
the voting rights of the holders of common stock on such issues.
On October 9, 1997, Adelphia Business Solutions issued $200.0 million
aggregate liquidation preference of 12 7/8% Senior Exchangeable Redeemable
Preferred Stock due 2007 in a private placement. Adelphia Business Solutions is
required to redeem all of the senior exchangeable preferred stock on October
15, 2007 at 100% of the liquidation preference of the senior exchangeable
preferred stock then outstanding. Dividends are payable quarterly, commencing
January 15, 1998, at 12 7/8% of the liquidation preference of outstanding
senior exchangeable preferred stock. Through October 15, 2002, dividends are
payable in cash or additional shares of senior exchangeable preferred stock at
Adelphia Business Solutions' option. Subsequent to October 15, 2002, dividends
are payable in cash. Prior to October 15, 2000, subject to certain conditions,
Adelphia Business Solutions may redeem up to 35% of the aggregate liquidation
preference of the originally issued senior exchangeable preferred stock at
112.875% of the liquidation preference thereof with the net proceeds of one or
more Qualified Equity Offerings (as defined). Commencing October 15, 2002,
Adelphia Business Solutions may redeem the senior exchangeable preferred stock
in whole or in part at 106.438% of the liquidation preference thereof declining
annually to par on October 15, 2005. Holders of the senior exchangeable
preferred stock have the right to require Adelphia Business Solutions to redeem
their senior exchangeable preferred stock at 101% of the liquidation preference
thereof upon a Change of Control (as defined). The Certificate of Designation
provides for, among other things, limitations on (i) additional borrowings,
(ii) payment of dividends or distributions, (iii) transactions with affiliates
and (iv) the sale of assets.
Warrants
Adelphia Business Solutions issued Class B warrants pursuant to the Class B
Warrant Agreement between Adelphia Business Solutions and Bank of Montreal
Trust Company, as warrant agent on April 15, 1996 as part of a private
placement by Adelphia Business Solutions of 329,000 units consisting of $329.0
million aggregate principle amount at maturity of 13% senior notes and Class B
warrants to purchase an aggregate of 1,993,638 shares of Class B common stock
of Adelphia Business Solutions. The following summary of certain provisions of
the Class B Warrant Agreement and the Class B warrants does not purport to be
complete and is qualified in its entirety by reference to the Class B Warrant
Agreement and the Class B warrants, including the definitions therein of
certain terms.
Each Class B warrants, when exercised, will entitle the holder thereof to
purchase 6.06 shares of Class B common stock at the exercise price of $0.00308
per share. The exercise price and the number of Class B warrant shares issuable
on exercise of a Class B Warrant are both subject to adjustment in certain
cases referred to below. The Class B warrants are exercisable at any time on or
after the earlier to occur of (i) May 1, 1997 and (ii) in the event a Change of
Control occurs, the date Adelphia Business Solutions mails notice thereof to
holders of the Senior Notes and to the holders of the Class B warrants, Class B
warrant shares and any other securities issued or issuable with respect
thereto. Unless exercised, the Class B warrants will
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automatically expire on April 1, 2001, the Expiration Date. Adelphia Business
Solutions will give notice of expiration not less than 90 and not more than 120
days prior to the Expiration Date to the registered holders of the then
outstanding Class B warrants. If Adelphia Business Solutions fails to give such
notice, the Class B warrants will not expire until 90 days after Adelphia
Business Solutions gives such notice. In no event will holders be entitled to
any damages or other remedy for Adelphia Business Solutions' failure to give
such notice other than any such extension.
In connection with the issuance of the Class B warrants, Adelphia Business
Solutions agreed to file Class B warrant shelf registration statements under
the Securities Act (i) covering the Warrants, on or prior to October 1, 1996,
and (ii) covering the Class B warrant shares, on or prior to January 1, 1997,
and to use its best efforts to cause such Class B Warrant Shelf registration
statements to be declared effective by the Commission on or prior to 90 days
after the dates specified for such filings. Adelphia Business Solutions filed a
Class B warrant shelf registration statement covering the Class B warrants and
the Class B warrant shares on September 25, 1996 and the Class B warrant shelf
registration statement was declared effective by the Commission on December 30,
1996. Adelphia Business Solutions has agreed to keep the Class B warrant shelf
registration statement with respect to the Class B warrants and the Class B
warrant shares as described in the immediately preceding paragraph effective
until October 1, 1999 and January 1, 2000, respectively. If Adelphia Business
Solutions does not comply with its registration obligations under the Class B
warrant registration rights agreement, it will be required to pay liquidated
damages to holders of the Class B warrants or Class B warrant shares under
certain circumstances.
Adelphia Business Solutions issued warrants to purchase its Class A common
stock in connection with a 1997 preferred provider agreement with MCI that
subsequently were acquired from MCI by Adelphia. These warrants are
exerciseable to obtain 1,421,499 shares of Class A common stock at an exercise
price of $6.15 per share.
On February 12, 1998, Adelphia Business Solutions consummated an agreement
with Lenfest Telephony, Inc. ("Lenfest") whereby Lenfest received a warrant to
obtain 731,624 shares of Class A common stock of Adelphia Business Solutions
(the "Lenfest Warrant") in exchange for its partnership interest in the
Harrisburg, Pennsylvania network. On May 15, 1998, Lenfest exercised its
warrant and received 731,624 shares of Class A common stock.
Dividend Restrictions
The terms of our various indentures and our Certificate of Designation
contain restrictions on our ability to pay dividends on the common stock. The
payment of dividends on the common stock is also subject to the preferences
that may be applicable to any then outstanding preferred stock.
Anti-Takeover Effects Of Provisions Of The Certificate Of Incorporation And
Delaware Law
Delaware General Corporation Law
As of the date of this prospectus, although Adelphia Business Solutions'
Certificate of Incorporation currently provides that Adelphia Business
Solutions is not subject to Section 203 of the Delaware General Corporation Law
("Section 203"), Adelphia Business Solutions could become subject to Section
203 through stockholder action in the future. As of the date of this
prospectus, Section 203, subject to certain exceptions, prohibits a Delaware
corporation, the voting stock of which is generally publicly traded (i.e.,
listed on a national securities exchange or authorized for quotation on an
inter-dealer quotation system of a registered national securities association)
or held of record by more than 2,000 stockholders, from engaging in any
"business combination" with any "interested stockholder" for a period of three
years following the time that such stockholder became an interested
stockholder, unless (i) prior to such time, the Board of Directors of the
corporation approved either such business combination or the transaction which
resulted in such stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in such stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting
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stock of the corporation outstanding at the time such transaction commenced,
excluding for purposes of determining the number of shares outstanding those
shares owned (y) by persons who are directors and also officers and (z) by
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or (iii) at or subsequent to such time,
such business combination is approved by the board of directors and authorized
at an annual or special meeting of stockholders, and not by written consent, by
the affirmative vote of at least 66 2/3% of the outstanding voting stock which
is not owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation; (iii) subject to
certain exceptions, any transaction which results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transactions involving the corporation which has the
effect of increasing the proportionate share of any class or series of stock of
the corporation which is beneficially owned by the interested stockholder; or
(v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning (or within the past
three years having owned) 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
Certificate of Incorporation
In addition to the voting rights of the Class A and Class B common stock
described above, Adelphia Business Solutions' Certificate of Incorporation, as
amended as of the date of this prospectus, by means of a "blank check
preferred" provision authorizes the Board of Directors, at any time, to divide
any or all of the shares of preferred stock into one or more series and to fix
and determine the number of shares and the designation of such series so as to
distinguish it from the shares of all other series. Further, the Board of
Directors, when issuing a series of preferred stock, may fix and determine the
voting rights, designations, preferences, qualifications, privileges,
limitations, options, conversion rights, restrictions and other special or
relative rights of the preferred stock of such series.
This blank check preferred provision gives the Board of Directors
flexibility in dealing with methods of raising capital and responding to
possible hostile takeover attempts. The provision may have the effect of making
it more difficult for a third party to acquire Adelphia Business Solutions,
discourage a third party from attempting to acquire Adelphia Business Solutions
or deter a third party from paying a premium to acquire a majority of the
outstanding voting stock of Adelphia Business Solutions. Additionally,
depending on the rights and preferences of any series of preferred stock issued
and outstanding, the issuance of preferred stock may adversely affect the
voting and other rights of the holders of the common stock, including the
possibility of the loss of voting control to others.
Equity Securities Offered
Any offering of our Class A common stock, Class B common stock, preferred
stock, depositary shares or other equity securities will be described in the
prospectus supplement relating to that offering.
If we offer a series of preferred stock, we will describe the particular
terms and conditions of the series of preferred stock offered by a prospectus
supplement in the prospectus supplement relating to that series of preferred
stock. The applicable prospectus supplement or prospectus supplements will
describe the following terms of each series of preferred stock being offered:
. its title;
. the number of shares offered, any liquidation preference per share and
the purchase price;
. any applicable dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation;
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. if dividends apply whether they shall be cumulative or non-cumulative
and, if cumulative, the date from which dividends shall accumulate;
. any procedures for any auction and remarketing;
. any provisions for a sinking fund;
. any provisions for redemption;
. any listing of such preferred stock on any securities exchange or market;
. the terms and conditions, if applicable, upon which it will be
convertible into common stock or another series of preferred stock of
Adelphia Business Solutions, including the conversion price (or manner
of calculation thereof) and conversion period;
. the terms and conditions, if applicable, upon which it will be
exchangeable into debt securities of Adelphia Business Solutions,
including the exchange price (or manner of calculation thereof) and
exchange period;
. any voting rights;
. a discussion of any applicable material and/or special United States
federal income tax considerations;
. whether fractional interests in that series of preferred stock will be
offered by entering into a deposit agreement that will be filed with the
SEC which provides for a depositary to issue to the public receipts for
depositary shares, each of which will represent ownership of and
entitlement to all rights and preferences of a fractional interest in a
share of preferred stock of a specified series;
. its relative ranking and preferences as to any dividend rights and
rights upon liquidation, dissolution or winding up of the affairs of
Adelphia Business Solutions;
. any limitations on the future issuance of any class or series of
preferred stock ranking senior to or on a parity with the series of
preferred stock being offered as to dividend rights and rights upon
liquidation, dissolution or winding up of the affairs of Adelphia
Business Solutions; and
. any other specific terms, preferences, rights, limitations or
restrictions.
BOOK ENTRY ISSUANCE
Unless otherwise specified in the applicable prospectus supplement, DTC will
act as depositary for securities issued in the form of global securities. Such
securities will be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One or more fully-registered global
securities will be issued for such securities representing in the aggregate the
total number of such securities, and will be deposited with or on behalf of
DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants deposit with DTC. DTC also facilitates
the settlement among its participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its direct
participants and by the New York Stock Exchange, the American Stock Exchange
and the National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others, known as indirect participants, such as
securities brokers and dealers, banks and trust companies that clear through or
maintain custodial relationships with direct participants, either directly or
indirectly. The rules applicable to DTC and its participants are on file with
the Commission.
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Purchases of securities within the DTC system must be made by or through
direct participants, which will receive a credit for such Securities on DTC's
records. The ownership interest of each actual purchaser of each Security,
commonly referred to as the beneficial owner is in turn to be recorded on the
direct and indirect participants' records. Beneficial owners will not receive
written confirmation from DTC of their purchases, but beneficial owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the direct
or indirect participants through which the beneficial owners purchased
securities. Transfers of ownership interests in securities issued in the form
of global securities are to be accomplished by entries made on the books of
participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their ownership interests in such securities,
except in the event that use of the book-entry system for such securities is
discontinued.
DTC has no knowledge of the actual beneficial owners of the securities
issued in the form of global securities. DTC's records reflect only the
identity of the direct participants to whose accounts such securities are
credited, which may or may not be the beneficial owners. The participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Although voting with respect to securities issued in the form of global
securities is limited to the holders of record of such securities, in those
instances in which a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to such securities. Under its usual procedures,
DTC would mail an omnibus proxy to the issuer of such securities as soon as
possible after the record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants to whose accounts such
securities are credited on the record date, identified in a listing attached to
the omnibus proxy.
Payments in respect of securities issued in the form of global securities
will be made by the issuer of such securities to DTC. DTC's practice is to
credit direct participants' accounts on the relevant payment date in accordance
with their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
participants to beneficial owners will be governed by standing instructions and
customary practices and will be the responsibility of such participant and not
of DTC or Adelphia Business Solutions, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payments to DTC are the
responsibility of the issuer of the applicable securities, disbursement of such
payments to direct participants is the responsibility of DTC, and disbursements
of such payments to the beneficial owners is the responsibility of direct and
indirect participants.
DTC may discontinue providing its services as depositary with respect to any
securities at any time by giving reasonable notice to the issuer of such
securities. In the event that a successor depositary is not obtained,
individual security certificates representing such securities are required to
be printed and delivered. Adelphia Business Solutions, at its option, may
decide to discontinue use of the system of book-entry transfers through DTC or
a successor depositary.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Adelphia Business Solutions believe to be
accurate, but Adelphia Business Solutions assumes no responsibility for the
accuracy thereof. Adelphia Business Solutions has no responsibility for the
performance by DTC or its Participants of their respective obligations as
described herein or under the rules and procedures governing their respective
operations.
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PLAN OF DISTRIBUTION
Any of the securities being offered under this prospectus may be sold in any
one or more of the following ways from time to time:
. through agents;
. to or through underwriters;
. through dealers; and
. directly by Adelphia Business Solutions to purchasers.
The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Securities may also be
offered or sold through depository receipts issued by a depository institution.
Offers to purchase securities may be solicited by agents designated by
Adelphia Business Solutions from time to time. Any agent involved in the offer
or sale of the securities under this prospectus will be named, and any
commissions payable by Adelphia Business Solutions to these agents will be set
forth, in a related prospectus supplement. Unless otherwise indicated in a
prospectus supplement, any agent will be acting on a reasonable best efforts
basis for the period of its appointment. Any agent may be deemed to be an
underwriter, as that term is defined in the Securities Act, of the securities
so offered and sold.
If securities are sold by means of an underwritten offering, Adelphia
Business Solutions will execute an underwriting agreement with an underwriter
or underwriters at the time an agreement for such sale is reached, and the
names of the specific managing underwriter or underwriters, as well as any
other underwriters, the respective amounts underwritten and the terms of the
transaction, including commissions, discounts and any other compensation of the
underwriters and dealers, if any, will be set forth in a related prospectus
supplement. That prospectus supplement and this prospectus will be used by the
underwriters to make resales of the securities. If underwriters are used in the
sale of any securities in connection with this prospectus, those securities
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices determined
by the underwriters and Adelphia Business Solutions at the time of sale.
Securities may be offered to the public either through underwriting syndicates
represented by managing underwriters or directly by one or more underwriters.
If any underwriter or underwriters are used in the sale of securities, unless
otherwise indicated in a related prospectus supplement, the underwriting
agreement will provide that the obligations of the underwriters are subject to
some conditions precedent and that the underwriters with respect to a sale of
these securities will be obligated to purchase all such Securities if any are
purchased.
Adelphia Business Solutions may grant to the underwriters options to
purchase additional securities, to cover over-allotments, if any, at the
initial public offering price, with additional underwriting commissions or
discounts, as may be set forth in a related prospectus supplement. If Adelphia
Business Solutions grants any over-allotment option, the terms of that over-
allotment option will be set forth in the prospectus supplement for these
securities.
If a dealer is utilized in the sale of the securities in respect of which
this prospectus is delivered, Adelphia Business Solutions will sell these
securities to the dealer as principal. The dealer may then resell such
securities to the public at varying prices to be determined by such dealer at
the time of resale. Any such dealer may be deemed to be an underwriter, as such
term is defined in the Securities Act, of the securities so offered and sold.
The name of the dealer and the terms of the transaction will be set forth in
the prospectus supplement relating to those offers and sales.
Offers to purchase securities may be solicited directly by Adelphia Business
Solutions and those sales may be made by Adelphia Business Solutions directly
to institutional investors or others, who may be deemed to be
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underwriters within the meaning of the Securities Act with respect to any
resale of those securities. The terms of any sales of this type will be
described in the prospectus supplement.
Securities may also be offered and sold, if so indicated in the related
prospectus supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment in connection with their terms, or
otherwise, by one or more firms "remarketing firms," acting as principals for
their own accounts or as agents for Adelphia Business Solutions. Any
remarketing firm will be identified and the terms of its agreement, if any,
with Adelphia Business Solutions and its compensation will be described in a
related prospectus supplement. Remarketing firms may be deemed to be
underwriters, as that term is defined in the Securities Act, in connection with
the securities remarketed by them.
If so indicated in a related prospectus supplement, Adelphia Business
Solutions may authorize agents and underwriters to solicit offers by certain
institutions to purchase securities from Adelphia Business Solutions at the
public offering price set forth in a related prospectus supplement as part of
delayed delivery contracts providing for payment and delivery on the date or
dates stated in a related prospectus supplement. Such delayed delivery
contracts will be subject to only those conditions set forth in a related
prospectus supplement. A commission indicated in a related prospectus
supplement will be paid to underwriters and agents soliciting purchases of
securities pursuant to delayed delivery contracts accepted by Adelphia Business
Solutions.
Agents, underwriters, dealers and remarketing firms may be entitled under
relevant agreements with Adelphia Business Solutions to indemnification by
Adelphia Business Solutions against some liabilities, including liabilities
under the Securities Act, or to contribution with respect to payments which
such agents, underwriters, dealers and remarketing firms may be required to
make in respect thereof.
Each series of securities will be a new issue and, other than the Class A
common stock, which is quoted on the Nasdaq National Market, will have no
established trading market. Unless otherwise specified in a related prospectus
supplement, Adelphia Business Solutions will not be obligated to list any
series of securities on an exchange or otherwise. We cannot assure you that
there will be any liquidity in the trading market for any of the securities.
Agents, underwriters, dealers and remarketing firms may be customers of,
engage in transactions with, or perform services for, Adelphia Business
Solutions and its subsidiaries in the ordinary course of business.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, as well as proxy statements
and other information with the SEC. You may read and copy any document we file
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at its Regional Offices in Chicago, Illinois or New
York, New York. You may obtain further information about the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are
also available to the public over the Internet at the SEC's web site at
http://www.sec.gov, which contains reports, proxy statements and other
information regarding registrants like us that file electronically with the
SEC.
This prospectus is part of a registration statement on Form S-3 filed by us
with the SEC under the Securities Act. As permitted by SEC rules, this
prospectus does not contain all of the information included in the registration
statement and the accompanying exhibits filed with the SEC. You may refer to
the registration statement and its exhibits for more information.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC. This means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus. If we
subsequently file updating or superseding information in a document that is
incorporated by reference into this prospectus, the subsequent information will
also become part of this prospectus and will supersede the earlier information.
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We are incorporating by reference the following documents that we have filed
with the SEC:
. our Transition Report on Form 10-K for the nine months ended December
31, 1998, as amended by Form 10-K/A. We refer to this Transition Report
on Form 10-K in this prospectus as the Form 10-K;
. our Form 10-Qs for the quarters ended March 31, 1999 and June 30, 1999;
. our definitive proxy statement dated October 4, 1999, with respect to
the Annual Meeting of Stockholders to be held October 25, 1999;
. our Form 8-Ks for the events dated February 16, 1999, February 25, 1999,
March 30, 1999 and September 21, 1999; and
. the description of our Class A common stock contained in our
registration statement filed with the SEC under Section 12 of the
Securities Exchange Act of 1934 and subsequent amendments and reports
filed to update such description.
We are also incorporating by reference into this prospectus all of our
future filings with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 until this offering has been completed.
You may obtain a copy of any of our filings that are incorporated by
reference, at no cost, by writing to or telephoning us at the following
address:
Adelphia Business Solutions, Inc.
One North Main Street
Coudersport, Pennsylvania 16915
Attention: Investor Relations
Telephone: (814) 274-9830
You should rely only on the information provided in this prospectus or
incorporated by reference. We have not authorized anyone to provide you with
different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the cover of the
prospectus. We are not making this offer of securities in any state or country
in which this offer or the acceptance thereof would not be in compliance with
the Securities or Blue Sky laws of such jurisdiction.
LEGAL MATTERS
Buchanan Ingersoll Professional Corporation, Pittsburgh, Pennsylvania will
pass upon the validity of the securities. Any required information regarding
ownership of Adelphia Business Solutions' securities by lawyers of such firm
will be contained in the applicable prospectus supplement. If the securities
are underwritten, the applicable prospectus supplement will also set forth
whether and to what extent, if any, a law firm for the underwriters will pass
upon the validity of the securities.
EXPERTS
The consolidated financial statements of Adelphia Business Solutions
(formerly known as Hyperion Telecommunications, Inc.) as of March 31, 1998 and
December 31, 1998, and for each of the years ended March 31, 1997 and 1998 and
the nine months ended December 31, 1998, all incorporated in this prospectus by
reference from Adelphia Business Solutions' Transition Report on Form 10-K for
the nine months ended December 31, 1998 have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is incorporated
herein by reference, and have been so incorporated in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
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8,750,000 Shares
Adelphia Business Solutions, Inc.
Class A Common Stock
ADELPHIA LOGO
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PROSPECTUS SUPPLEMENT
November 23, 1999
(Including Prospectus Dated October 25, 1999)
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Salomon Smith Barney
Credit Suisse First Boston
Donaldson, Lufkin & Jenrette
Goldman, Sachs & Co.
Banc of America Securities LLC
CIBC World Markets
Credit Lyonnais Securities (USA) Inc.
First Union Securities, Inc.
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[Graphic Description of the Inside Front Cover]
Inside Front Cover depicts a map of the United States highlighting the
Company's markets.
