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SEC Filings

10-Q
AVALON CABLE OF MICHIGAN INC/ filed this Form 10-Q on 08/16/1999
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senior indebtedness, including indebtedness under the credit facility. Interest
on the senior subordinated notes accrues at the rate of 9 3/8% per annum and is
payable semi-annually in arrears on June 1 and December 1 of each year, to
holders of record on the immediately preceding May 15 and November 15.

    The issuers believe their market risk exposure with regard to their
financial instruments is limited to changes in the interest rates in the United
States. Based upon the composition of the issuers' variable rate debt
outstanding at June 30, 1999 which is the credit facility, a hypothetical 100
basis point increase in interest rates would increase interest expense by
approximately $0.35 million for a quarter for each issuer.

    The issuers are holding companies with no significant assets other than
their investment in their operating subsidiaries. The primary source of funds to
the issuers will be dividends and other advances and transfers from their
operation subsidiaries. The ability of the issuers' operating subsidiaries to
make dividends and other advances and transfers of funds, including funds
required to pay interest on the senior discount notes when due, is subject to
certain restrictions under the credit facility, the indenture governing the
senior subordinated notes and other agreements to which the issuers become a
party. A payment default under the indenture governing the senior subordinated
notes would constitute an event of default under the credit facility, and could
result in the acceleration of the indebtedness thereunder.

    The credit facility, the indenture governing the senior discount notes, and
the senior subordinated note indenture contain financial and other covenants
that restrict, among other things, the ability of the issuers and their
operating subsidiaries and certain of their affiliates:

    .   to incur additional indebtedness,

    .   incur liens,

    .   pay dividends or make certain other restricted payments,

    .   consummate certain asset sales,

    .   enter into certain transactions with affiliates,

    .   merge or consolidate with any other person or

    .   sell, assign, transfer, lease, convey or otherwise dispose of all or
        substantially all of our assets.

    Such limitations, together with our highly leveraged nature, could limit the
corporate and operating activities of the issuers in the future, including the
implementation of our growth strategy.

    We believe that cash generated from operations and borrowings expected to be
available under the credit facility will be sufficient to meet our debt service,
capital expenditure and working capital requirements for the foreseeable future.
We will require additional financing if our plans materially change in an
adverse manner or prove to be materially inaccurate, or if we engage in any
significant acquisitions. We cannot assure you that this financing, if permitted
under the terms of the indenture governing the senior discount notes or other
then applicable agreements, will be available on terms acceptable to us or at
all.

    We have signed an agreement with Charter Communications, Inc.("Charter
Communications") under which Charter Communications agreed to purchase for cash
all of the equity interests in our company and assume and repay our outstanding
debt. The completion of this transaction would cause an event of default under
our credit facility. Our agreement with Charter Communications requires that it
either pay all amounts due under the credit facility at the time the acquisition
is completed or cause the event of default arising from its acquisition to be
waived. The consummation of the Charter Communications transaction would also
constitute a change of control under the indenture of the senior discount notes.
As a result, the issuers will be required to offer to repurchase the senior
discount notes from each holder at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
liquidated damages thereon to the date of purchase. The amount of cash that the
issuers will need to repurchase the senior discount notes from holders upon a
change of control will depend upon the number of holders that accept the
issuers' offer to repurchase such senior discount notes. To the extent that the
issuers have insufficient funds to repurchase all of the senior discount notes
for which their offers to repurchase the senior discount notes are accepted by
holders, (1) the issuers must borrow funds to repurchase such senior

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