No additional borrowings may be made under the senior term loan facilities.
Borrowings under the revolving credit facility are available for working capital
purposes, capital expenditures and pending and future acquisitions. The
revolving credit facility terminates, and all amounts outstanding thereunder are
payable, on October 31, 2005. In addition, the credit facility provides for up
to $75.0 million in an uncommitted acquisition facility. Borrowings under the
credit facility are guaranteed by each of the issuers, Avalon Cable and Avalon
Cable of New England Holdings, Inc. The credit facility is secured by
substantially all of the assets of the issuers' operating subsidiaries in which
a security interest may be granted.
The senior subordinated notes were issued in an aggregate principal amount
of $150.0 million and will mature on December 1, 2008. The senior subordinated
notes are general unsecured obligations of the issuers' operating subsidiaries
and are subordinated in right of payment to all of their current and future
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
September 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