HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
October 1998, the Partnership elected to satisfy interest due through the
issuance of $1,945,667, $2,156,740, $2,037,079, $2,408,370 and $2,552,871,
respectively, additional Subordinated Notes. After September 2001, a holder or
holders of no less than 33 1/3% of the aggregate principal amount of the
Subordinated Notes can require the Partnership to repurchase their Subordinated
Notes at a price equal to the principal amount thereof plus accrued interest.
The Partnership has an option to redeem the Subordinated Notes at 102% of the
aggregate principal amount after the fifth anniversary of their issuance, at
101% of the aggregate principal amount after the sixth anniversary of issuance
and at 100% of the aggregate principal amount after the seventh anniversary of
Holders of the Warrants have the right to acquire the Units at any time for
a price of $1,500 per Unit. After September 2001, a holder or holders of at
least 33 1/3% of the Warrants can require the Partnership to either purchase
their Warrants at their interest in the Net Equity Value of the Partnership or
seek a purchaser for all of the assets or equity interests of the Partnership.
Net Equity Value pursuant to the terms of the underlying agreements is the
estimated amount of cash that would be available for distribution to the
Partnership interests upon a sale of all of the assets of the Partnership and
its subsequent dissolution and liquidation. The Net Equity Value is the amount
agreed to by the Partnership and 66 2/3% of the holders of the Subordinated
Notes and Warrants or, absent such agreement, determined through a specified
The Partnership estimated the Net Equity Value of the Warrants to be
approximately $43,250,000 at December 31, 1998 and $16,750,000 at December 31,
1997. Such estimate as of December 31, 1998 reflects the amount that the holders
of the warrants have agreed to accept for their interests assuming the proposed
sale of all of the interests of the partnership is consummated (see note 14).
The increase in the estimated Net Equity Value over the original carrying value
of the Warrants is being accreted evenly over the period beginning with the date
of the increase and September 2001. Such accretion is being reflected in the
accompanying financial statements as an increase in the carrying value of the
Warrants and a corresponding reduction in the carrying value of the capital
accounts of the General and Class A Limited Partners.
The agreements underlying the Subordinated Notes and the Warrants contain
various restrictive covenants that include limitations on incurrence or
guarantee of indebtedness, transactions with affiliates, and distributions to
partners. In addition, management fees in the aggregate cannot exceed 5% of
gross revenues of the Partnership.