The Falcon debentures will be redeemable at the option of the issuers, in
whole or in part, at any time on or after April 15, 2003, at a premium and, in
each case, plus accrued and unpaid interest, if any, to the date of redemption.
This premium declines over time to 100% of their principal amount, plus accrued
and unpaid interest, if any, on or after April 15, 2006. In addition, at any
time prior to April 15, 2001, the issuers may redeem, at a premium, up to 35% of
the total principal amount or accreted value, as applicable, of the Falcon
debentures with the net cash proceeds of specified equity issuances, in each
case plus accrued and unpaid interest, if any, to the date of redemption.
Following a redemption, at least 65% in total principal amount at maturity of
the Falcon senior discount debentures and $195 million of the total principal
amount of Falcon senior debentures must remain outstanding.
In the event of specified change of control events, the holders of the
Falcon debentures will have the right to require the issuers to purchase their
Falcon debentures at a price equal to 101% of their principal amount or accreted
value, as applicable, plus accrued and unpaid interest, if any, to the date of
purchase. The Falcon acquisition will give rise to this right. We expect the
Falcon debentures to be tendered. We intend to finance required repayments of
Falcon debentures with debt financing that has not yet been arranged. We have
obtained a commitment for a Falcon bridge loan facility providing for borrowings
up to $750 million to finance these repayments until this additional debt
financing can be arranged or if this additional debt financing is unavailable.
The Falcon debentures are joint and several senior unsecured obligations of
the issuers. The Falcon debentures are the obligations of the issuers only, and
the issuers' subsidiaries do not have any obligation to pay any amounts due
under the Falcon debentures. Therefore, the Falcon debentures are effectively
subordinated to all existing and future liabilities of the issuers'
Among other restrictions, the indentures governing the Falcon debentures
contain certain limitations on the issuers' and their specified subsidiaries'
- incur additional debt;
- make restricted payments;
- create certain liens;
- sell all or substantially all of their assets or merge with or into other
- invest in unrestricted subsidiaries and affiliates;
- pay dividends or make any other distributions on any capital stock; and
- guarantee any debt which is equal or subordinate in right of payment to
the Falcon debentures.
The events of default for the Falcon debentures include a cross-default
provision triggered by the acceleration of the maturity, or nonpayment of debt,
by Falcon Holding Group, L.P. or any specified subsidiary in excess of $25